Homes that are priced aggressively can often generate multiple offers. Both sellers and banks can do this, in order to generate as many offers as possible and ultimately shake out fair market value.  

Unless you absolutely MUST have a particular home, and price is no object, be very careful about entering a bidding war. Such auctions can drive the price of a home ABOVE its fair market value.

But if you really want a home and you know that other offers will be made, here’s how to improve your chances of winning in a multiple offer situation.

1.        Use comparable sale data to predetermine the upper limit of what you’ll pay. Don’t get caught up by the excitement of a bidding war and let your emotions override your common sense. Be sure that you know how to determine fair market value. Set a no-matter-what limit on the amount that you’ll bid. Otherwise, you could grossly overpay.

2.        Try to find out what the seller’s needs are. A high purchase price isn’t the only way to sweeten a deal. If you have the money, make an extra large down payment so the sellers know that your loan will be approved. You might offer to let the sellers rent back their house for a month or two after the close of escrow. Or give the sellers an extra long close of escrow so they have plenty of time to move. You could also offer to buy the home “as is” so the seller won’t have to make any repairs.

3.        Make your best offer initially. Don’t hope for a counter offer – you may never get a second chance to make your best offer.

4.        Get preapproved for a loan. Informed sellers worry about the financial strength of prospective buyers. They don’t want to waste their time on buyers who can’t qualify for a loan. All other things being equal, if you’re preapproved, you should prevail over buyers whose financial status is in doubt.

5.        Don’t make your offer subject to the sale of your old house. If you own a home that you must sell in order to get the down payment for your new home, you’re in trouble. You’ll most likely be competing with other buyers who don’t have that limitation. The sellers have enough problems selling their house without worrying about whether you can sell yours. Why should they take your offer if they can accept one without a contingency? Offers made subject to the sale of another house get no respect in a multiple offer situation.

6.        If you must sell in order to buy, put your old house on the market before looking for a new house. Ideally, your old house should be in escrow before you place an offer on a new house. Then, your negotiating position will be much stronger.

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