In today’s real estate market, housing inventory is extremely limited. Many sellers have held off on listing their homes due to economic or COVID concerns, and that, coupled with low mortgage rates, has led to an uptick in buyer demand. As such, home prices have soared on a national level, making it even more difficult for new buyers to break into the market.
Compounding the issue is the fact that so many homes on the market have wound up in bidding wars. If you’re not familiar with the concept, a bidding war happens when two or more buyers keep making offers on the same property in the hopes of getting to purchase it. One buyer will make an offer over a home’s asking price, and the competing buyer will counter with an even higher offer. After a series of subsequent back-and-forth offers, the victorious buyer will generally wind up paying substantially more for the home than what its seller initially asked for.
Bidding wars commonly work to a seller’s advantage, but for buyers, they can be stressful and costly. But thankfully, the percentage of homes subject to bidding wars is finally beginning to decline. And if that continues, it’ll create an easier housing market for buyers to navigate.
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Bidding war activity dropped in June
According to Redfin, the share of properties facing bidding wars declined to 65% in June, down from 72.1% in May and 74.1% in April. That’s the good news.
The bad news is that June’s numbers still amount to a 56.8% increase in bidding wars compared to June of 2020. June was also the 14th month in a row where more than 50% of listed homes wound up with multiple bidders.
How to win at a bidding war
While bidding wars may finally be on the decline, they’re still something today’s buyers might have to deal with. If you’re in the process of trying to purchase a home, there are certain steps you can take to increase your chances of winning one.
First, get pre-approved for a mortgage. Doing so won’t guarantee you a home loan, but it will send a message to sellers that you’re not only a serious buyer, but that your finances are such that you’re likely to get a mortgage. That, in turn, minimizes sellers’ risk.
Another way to win a bidding war? Be very flexible with your closing date. Your seller may seek to delay your closing for months. If you can work with that, do it.
Finally, don’t hesitate to write what’s known as a real estate love letter, where you explain to a given seller why you really want to buy the home you’re bidding on. Interestingly, Oregon recently banned these letters for fear that they could lead to discrimination, but in most states, they’re still on the table.
The fact that bidding war statistics are dropping is a positive thing for buyers, but that doesn’t mean you won’t face one yourself. Do what it takes to give yourself an edge so you can walk away successful.