Expert Advice for How to Handle a Bidding War on Your House

1. Bidding wars happen naturally in a seller’s market

First off, bidding wars don’t happen in a vacuum — market conditions play a huge role.

Barry Kunselman, a top real estate agent in Denver, Colorado, who sells homes nearly 50% faster than his peers, explains what a bidding war in a seller’s market might look like.

“What happens is, a property can hit the market on Thursday or Friday,” he explains, adding that the majority of home shoppers start their search on the weekend. “And then — all of a sudden — they have multiple offers on Monday and Tuesday. All the buyers that went for another property missed out, and now they’re coming back to their second choice, generating 3-4 offers by the next week.”

The scenario Kunselman describes was common during the pandemic era hot seller’s market, as homebound Americans sought improved home sanctuaries and new places to live, boosted by the rise of remote work and record-low interest rates. While higher interest rates have slowed or halted bidding wars in the current market, once mortgage rates start to fall, bidding wars will likely follow.

Understanding market conditions is useful to you and your agent when arriving at a price. An experienced listing agent will know just how to pique a buyer’s interest in any market.

2. Understand how price drives demand

Coming up with a fair market price is a crucial first step in listing your home and generating multiple offers. Your real estate agent will examine comparable home sales (called comps) in the area to make sure you don’t price your home too high and lose buyer interest.

3. Build hype around your listing with a marketing blitz

Another effective way to get multiple offers where demand is high is to build some hype before putting your listing on the MLS.

Get aggressive and market your home using all the outlets available to you — printed materials, professional photos, newspaper ads, and all the social media platforms you’re on.

Once you’ve done your part, it’s time for your real estate agent to take the reins and put your house on the multiple listing service (MLS).

You and your agent can agree to defer showings to build hype even further. Think of it as a drumroll that lasts considerably longer than usual. Standard bidding war wisdom says to schedule showings late in the week.

Don’t stop there!

A good agent will know just what to say to buyers’ agents to get the best offers. Typically, this means mentioning that strong offers are on the table but leaving out any details. It’s OK to play coy when your house is the belle of the ball.

4. Have your agent host a broker’s open house

Hosting a broker open house is a great way to spread the word about your listing, and all you need to do is stand back and let your agent work their magic.

They will know just who to notify and how to get them to show up. The more real estate agents, the merrier, especially when you want to bring in a wide variety of offers.

As with general open houses, too, a great real estate agent will make your home shine with expert staging.

5. Set a deadline to create a sense of urgency

Turn up the heat and show the market that you mean business with a deadline. If done correctly, you’re likely to see an influx of competitive offers, as the sense of urgency tells buyers to bring their A-game.

However, this is not a surefire strategy when done hastily. Your agent should first confirm that your home is priced just right and that offers are soon to come.

Once a few have come in, your agent will spread the word using the MLS and their many connections that you, the seller, are looking for top-notch offers by a certain date and time.

6. Overlap showings to highlight buyer competition

Want to turn up the heat even more? Let potential buyers see their competition — or at least their presumed competition. This could mean inviting people you know to your open house, even if they have no intention of buying.

Another trick is to overlap your showings to create the illusion of a tight schedule that can barely accommodate your many interested buyers. Feel free to really ham up just how busy you are.

How to handle a bidding war

Seeing all offers made on a house at one time not only levels the playing field for buyers, it also allows the seller to make a more informed decision. There are also laws in most states that dictate how home purchase offers must be handled.

If no one offer stands out to the seller, they can then have the bidders duke it out — though not literally — sometimes for several rounds of bidding.

There are several things sellers should take into consideration before accepting an offer. Below are six pieces of expert advice on how to handle a bidding war on your house.

1. Money isn’t everything

If you’re so lucky as to generate multiple offers on your home, it’s a delicate dance all the way to closing. You need to stand firm and negotiate the best deal — without recklessly wielding your newfound power (or getting taken by a flakey buyer who can’t follow through on their big promises).

The final agreed-upon purchase price is undoubtedly important, but be sure your contract details remain intact and keep an eye on the earnest money deposit as well. A large deposit is a good indication that the buyer is committed. Depending on your circumstances, there are other ways of sweetening the deal.

For instance, a buyer can remove all or some contingencies on the sale or present an offer that suits the seller’s timeline; that is, they can offer a more expedient closing or give the seller the option of remaining in the house for a set period of time.

2. Ask: Can the buyer truly afford your house?

Let’s say you’ve played your hand well and are now looking at several competitive offers. Keep in mind that sometimes buyers will make an offer that’s too good to be true out of desperation.

3. What if the appraisal comes in low?

A low appraisal can really throw a wrench in your bidding war. Even if a buyer makes an impressive offer, their lender will only care about how much the house is worth according to the appraisal.

And if that appraisal comes in lower than the asking price, the buyer may find himself needing to put down a significantly heftier down payment. This could lead to a renegotiation of the purchase price or to the buyer taking their offer completely off the table.

4. Dealing with cash offers

Loans are far and away the most common way of financing a house. Currently, only 29% of residential home sales are paid for in cash.

But if you’re lucky enough to receive a cash offer, you should seriously consider it. Even if the offer comes in lower than the others, you get to avoid many of the headaches associated with a buyer taking out a loan, bypassing the appraisal process, and closing the sale fast.

5. Escalation Clauses

Buyers can increase the appeal of their offer by including an escalation clause, which comes in particularly handy when several other buyers are interested.

This means their offer price will automatically escalate higher than competing offers. Escalation clauses tend to stipulate the increments by which the price increases as well as how high the buyer is willing to go.

These are common in very competitive markets.

6. Home sale contingencies

Contingencies are sale conditions that the buyer sets, and they can come in many forms. While contingencies are meant to land a deal that benefits the buyer, removing them from an offer will make it more attractive to a seller.

One contingency may be that the buyer’s home must sell before they can purchase yours. Another common one is a home inspection contingency. You can gauge the interest of the buyer based on the number of contingencies they’re willing to waive. As a seller, fewer contingencies means fewer problems.

Seek local expert advice on handling a bidding war in your market

When all is said and done, multiple offers are a seller’s best friend. But as Han Solo cautioned an enthusiastic Luke Skywalker, “Great, kid. Don’t get cocky.” A bidding war must be handled with care, wisdom, and balance.

If you want to successfully start and execute a bidding war, partner up with an experienced real estate agent and follow conventional house bidding war advice so you can sell your home on your terms.

Header Image Source: (Bailey Anselme / Unsplash)