As recent data points to an increasing gap between inventory and demand for homes, competition has become intense. Some researchers are looking at strategies homebuying hopefuls and their agents can embrace to better their chances of winning when a bidding war breaks out.
One of the best ways to come out on top, found a Redfin study, is to make an all-cash offer, which, researchers say, almost quadruples a prospective buyer's chances, raising the odds by 290%. Waiving the financing contingency also is an effective strategy, improving homebuyers’ odds of winning by 66%, according to an analysis of data on thousands of offers written by Redfin agents on behalf of their homebuying clients from July 2020 to February 2021.
The study also examined the potential effect of waiving the inspection contingency and including an escalation clause. Although these moves don’t up buyers’ chances of winning a bidding war, that’s likely only because those strategies are so common in a competitive market, Redfin reports.
"Many buyers waive the inspection contingency and include an escalation clause when they know a home will receive multiple offers, so neither strategy ups one buyer’s chances over that of a competitor," noted Redfin data journalist Dana Anderson.
Agents for Redfin report that well-priced single-family homes are receiving dozens of offers, and in some areas desirable homes are so competitive that they’re selling for hundreds of thousands of dollars over asking price.
“All-cash offers are usually an effective bidding-war strategy, but the market is so hot that even the number-one strategy has evolved this year,” said Orlando Redfin agent Nicole Dege. “All-cash buyers used to be able to go in a little below list price, but now I’m seeing a lot of cash offers that are at list price or higher. Anything below list price, regardless of the terms, just can’t compete.”
Rachel Wilson, a Redfin agent in Spokane, WA says it’s important for buyers to sweeten their offer in any way they realistically can.
"Sometimes that’s more cash, sometimes it’s waiving contingencies, but other times it’s a matter of figuring out what the seller wants, like a fast close or a provision to allow the sellers to rent the home back for a few months.”
The full report is available on Redfin.com.