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How To Create a Financed Offer that Wins Bidding Wars

By Guest Author | September 13, 2018

If you've bought a home recently, you probably participated in a bidding war. Bidding wars are a reality in virtually all real estate markets today as there is high demand for properties and low inventory everywhere.

Consider this situation: Mark (40) and Nina (35) found themselves in a bidding war in Charlotte, NC. Expecting their first child, they believed it was time to consider putting money in a house. After some long deliberation and conversation about the kind of home they wanted, they searched out a reliable agent and started searching for homes that met their criteria. So, they searched and eventually found an adorable two story home with beautiful windows and a big front porch. It was perfect.

Mark was a small business owner, he had a good credit so getting a loan wouldn't be much of an issue, and his wife was a teacher. Needless to say, they got approved for a loan. He and his wife already saved enough to cover a 20% down payment. So they got down to the business of making an offer.

Everything was set and it should only be a case of making an appealing offer to the seller. Well until Mark's agent got an insider tip that the house already had five offers, both cash and financed. To cut the story short, Mark lost the home to a cash buyer even though Mark's proposed financed offer was greater than all the other offers.

It's no news that Charlotte, NC is one of the hottest markets in the country currently. And that cash is king in today's very competitive market. The fact is that there is a sense of security that an all-cash offer gives a seller who is planning to sell his home fast and move on. Place yourself in the seller's shoes. Would you rather go with the highest cash offer or a financed offer that promises to pay more? You'll probably go with the first option too.

Nonetheless, Bidding wars can be approached as a literal contest. If you want to win (using a war metaphor), you should find out your seller's pain points and use that to construct your offer. So, the important thing when making an offer is to ask questions. Find out about their priorities and if perhaps, you can help them achieve their goal. If your offer appeals emotionally or financially to a seller, your chance of winning shoots up.

If you can't appeal financially to a seller, i.e. present cash (cash is king) then strengthen your offer by appealing to their sentiments. Some people have found it effective to write an honest letter that appeals to a seller's emotions. So, if you're competing with a cash buyer on a house you really want, here are 7 things you can do:

1. Submit a good first offer and submit it fast. People trust first instincts more these days. Most sellers favor their first offer, especially if it hits the right notes with them. So you want to put your best foot forward and do that fast. You can also get your agent to hand deliver your offer, just to give you the edge, as most people won't do this. Here are two ways to notch up your offer:

• Make your best offer up front. Make a good first impression. This is not a time to low ball it and ride upwards as you might not get the second chance. You should make your best offer immediately. One thing you can do to make that good first impression is to add an escalation clause. So if Mark's offer was $350,000. Let's say he added an escalation clause that increases his offer by $2000 over competing offers up till $400,000. If the highest offer the seller gets is $370,000, Mark's bid rises to $372,000.

But don't raise your offer price too much as banks won't spend money on an inflated property. Have your agent check out comps and just go in with your best offer the first time.

• Get an Underwriter's review of your loan application. All financed offers have likely been pre-approved. Your pre-approval letter will not get you past other financed offers, much less cash buyers.

If possible, you should apply to get an underwriter's review of your loan application. This ensures that financing will be made available to you and also gives the seller more confidence. An underwriter's review can actually place you on par with a cash buyer. Not every lender offers this. So get more information from your bank.

2. Earnest money. A bigger amount in earnest money signifies to the seller that you are committed to buying the house. However, don't put a strain on your finances.

3. Inclusions. When you ask that the fridge is included in your purchase, you risk losing out to competitors. If possible, don't ask for inclusions. But if you can't resist the desire to get the washer thrown into the deal, let the seller decide if they'd like to.

4. Inspections. While you definitely should not forgo inspections as that can be risky, you want to make the inspection period short. But if you don't want to go down that route, just limit how much the seller will be asked to fix.

5. Closing date. A seller would likely have a target closing date in mind. Most sellers want a fast closing. If you express your desire to close fast in your offer, you have a better chance than others. You can go a step further by adding a per diem to your offer. What this means, according to William Golightly of Poole Realty, Live Oak, Fla is that "Each party agrees that if you can't close on a certain date, the seller will automatically extend the contract for, say, up to 15 more days. But it costs you as the buyer anywhere from $20 to $75 per day until it’s closed."

6. Possession date. Does the seller need more time, ask them if they want a day or two to move out after closing. Flexibility will always work in your favor when negotiating an offer.

7. Apply for conventional financing instead of FHA. FHA loans offer great rates but they can easily fall through. Many sellers sideline offers dependent on FHA loans because of their propensity to disappoint. You have a better chance with conventional loans.

In conclusion, note that cash is still always king. With fewer homes on the market and high prices, putting up cash for a home might make you a favorite. So one of the strategies some people use to strengthen their offer is joint ownership. There are also financial services and private lenders that offer cash backing to get you your dream house. However, ensure you're sure on terms and conditions and get more neighborhood-specific information from a lawyer.

Agnes A Gaddis specializes in writing in-depth and confident content for businesses. She cherishes the ability to express valuable, timely information to people who need it and the reactions she gets from that. She is a communications graduate and can be found writing real estate and personal finance content for clients at

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