You've heard that it's a seller's market. When demand for homes in your area is high, and you're ready to put your home on the market, you might have a vision of a fast sale, a high sales price, and a convenient close. All of these things can be true, but there are a lot of different strategic factors going on in the background that can determine whether you get that speedy timeline, the high price, or the simplicity of a deal well-struck — or all three at once. Well-priced homes in the right market and circumstances can even trigger a bidding war in real estate or a cascade of incremental offers where prospective buyers keep raising the price to ensure that their offer is the offer you choose. While the market may be in your favor, it takes the expertise of an experienced local Realtor to help you have the biggest chance of a favorable house bidding war, why they happen, and what to look for so you choose the best offer in a trigger war — not just the biggest one.
How does a home bidding war work?
In today's market, almost every home in a desirable area will receive multiple competing offers from buyers that are interested in the property. Their agents will check in to see how competitive these offers are, what price ranges and contract terms will make their clients' offers even more appealing, and what direction the seller is leaning in. This triggers highly motivated buyers to incrementally improve their offers in the hopes of out-competing those offers. They may offer higher prices, shorter option periods, longer leasebacks, or all-cash offers that completely remove the risk of the deal falling apart. As the price goes higher and higher past the initial asking price, the competition is called a 'bidding war.' Sellers with a bidding war on their hands can watch more and more attractive offers fall into their hands, just waiting to be selected.
What to look for in the offers you get from a bidding war
When you're selling an attractive home in a hot market, and your agent has helped you start off your marketing on the right foot, chances are good that you'll see a bidding war start to brew. As you see a torrent of offers start to come in, it's easy to get swept up in the high numbers and the growing excitement. But having a clear idea of what matters most to you and being able to identify some common red flags can help you choose the right offer. Keep these helpful tips in mind:
Don't just go for the biggest dollar value
In a bidding war, prospective buyers will naturally offer higher selling prices. According to TheMortgageReports, the average home sold for 1.3% over the list, and many bidding war offers go to 3% above the listing price. In high competitive Zephyr Cove real estate markets, however, buyers may offer more than 10% over list. But when offers get too high, lenders' appraisals may not support those offers, and the buyer won't be able to secure financing. If you're tempted by a high-ball offer, make sure the buyer can actually close.
Focus on all-cash offers
All-cash offers give a better guarantee that the deal will close than traditional lending arrangements. If a buyer is bringing cash to the table, you don't have to worry about them securing lending or a lender refusing to continue on because the difference between the appraisal value and the offer is too high. Even if an all-cash offer is $5,000-$10,000 less than your top offer, it may be worth picking the all-cash option just for peace of mind.
Weed out offers that don't include appraisal waivers
In a bidding war, the offers may quickly outstrip what professional appraisers value your property. This isn't an insurmountable problem for buyers; they just have to provide the cash to make up the difference.
For example, suppose a buyer offers $600,000 for your home and is paying 20% down, but the appraiser determines your home is really worth $500,000. In a contract without an appraisal waiver, the buyer would be able to walk away for not being able to secure funding. But if they sign an appraisal waiver, they are still bound by the contract — that difference must come out of their own pocket.
Serious buyers will offer appraisal waivers to signal to you, the seller, that they have the money to make sure the deal goes through.
But partial appraisal waivers can stay in the "maybe" pile
Savvy buyers may offer a compromise that still gives you peace of mind. A partial appraisal waiver puts a ceiling on how much the buyer is willing to pay out of their own pocket if there's a difference between the appraisal value and the offer value. In the same situation as above, the buyer may offer an appraisal waiver that extends only to an appraised value of $475,000. This protects the buyer without being an inconvenience.
Consider buyer caveats that can get in your way
There are a few complex contract elements that can set different offers apart. For example, a buyer may offer you a lengthy leaseback without any rent, not list out any complex or onerous objections, or otherwise be a clean, simple contract. They might also set a very short option period (the period when they can walk away from the deal without further penalty) of zero or one day instead of five or seven days. These offers, even if they don't give you the highest dollar value, can give you a lot in terms of simplicity, peace of mind, and minimal aggravation.
Opt for a close closing date (If that suits your schedule)
Different buyers can also offer different closing dates. All-cash buyers or buyers that already have their lending secured can expedite the entire process, getting you to the final closing date faster. If you're in a hurry to move to a new house or start a new job, offers that give you speed may be more appealing than money alone.
Allow backup offers
In a bidding war, you're going to see more than one attractive offer. If there's a second-place contender that you wouldn't mind selling in the event the first deal falls through, have your agent reach out to the other agent and let them stay on as a backup offer. This lets you keep a second option in your pocket, so your property doesn't have to go on the market again.
Choose a deal that's likely to close without complications
Ultimately, all of these tips are about making sure you walk away from the transaction satisfied. Are you on a tight deadline? Do you want a high selling price, and you're not in a hurry? Do you hate finicky deals, and you just want the transaction handled? Know your priorities and preferences, so you can pick the offer that best aligns.
Bidding wars are overwhelming — how can an agent help?
There are a lot of moving parts in real estate transactions. Having a bidding war on your property is a great problem to have, but it can still be challenging. Your agent can help you identify your priorities, understand the fine print of contracts, and determine which offers to suit your needs best. If you're starting to feel overwhelmed, consider these advantages of having a real estate agent throughout the process.
Agents have to present all offers
Your agent won't make decisions for you or try to influence your decision. Realtors have a fiduciary duty to put their interests above their own. So they'll fairly present all of the offers your home receives, answer your questions, and walk through the details of each offer.
They can recommend third-party services they trust
The transaction process involves a lot of third parties. Title companies, stagers, photographers; as you move through the process and try to ensure your home has a great first impression, your agent can help you find the right resources and professionals for every step.
They know contracts
Do you have a wish list of different prices, details, and timelines that make up your ideal offer? Your agent can help you decipher contracts and determine which offers to provide the provisions you really want. Without that guidance, it's easy to focus just on the price or not see what possibilities are allowed for in a contract. Whether you have a tight timeline, have heirloom doorknobs that you want to come with you to your next property, or need to stay in your home past the close date because your future home isn't ready yet, real estate agents have the experience and expertise to translate those wants and needs into contract terms.
Win your home's bidding war by choosing the right offer for you
Houses for sale in South Lake Tahoe and other popular locations in the Stateline, NV, real estate area are ripe for bidding wars and purchase offers that let sellers leave to enjoy their next adventure with a lot of capital. Live Tahoe Real Estate is a team of experienced local Realtors who are here to help during every step of your house-selling journey. Our team can create a personalized house-selling plan for your home, advise you on how to strategically stage, photograph, and list your home, and help you negotiate offers and understand what buyers are offering you. Contact us today to get started on your house-buying journey.