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Home Bidding Wars: What Are They Good For?

War is a really strong word. The term “bidding war” suggests an open auction: thrilling and tension-building with occasional scuffles over artwork or farm implements, I’m sure. But unlike most residential real estate sales, this type of auction requires cash in-hand when the gavel comes down.

If a home performs particularly well on the contract/offer due date, when the realtor’s gavel slams I call it a “surrender war.” Buyers must surrender to win in a seller’s market, but is this always the case? Must buyers first swallow their pride and start dialing for dollars? Call Mom and Dad, as if paying for college wasn’t enough?

To be a competitive buyer for a home that hits all of the right pleasure points, is priced right and presented well, the loan must be locked and the down payment large. It’s all about risk. Less money down means less dog in the fight, from a lender’s perspective. Agents look for the most “solid” financing and, of course, sellers want a slam dunk. Naturally, after a few weeks without an offer, listing agents and sellers alike become surprisingly tolerant of loans that can allow homeownership with little money down.

Must buyers overlook defects, kick their inspector to the curb and take the home as-is? Well, first of all, bay and porch-front homes are extremely simple to understand (the physical parts anyway), and, ironically, the fewer updates the house has, the simpler it is. Nevertheless, for the right home, a buyer’s inspection can be a weapon the buyer can lay down if time allows for a pre-offer inspection or a tool to pick up if a listing is languishing on the market.

Must the settlement be lightning fast? Should a buyer pay both a new mortgage and a locked-in lease while the seller moves easily and leisurely? An educated buyer can spot the right house at the right price before walking in the door. However, they have to see, touch and feel it to know if they should pull out all the stops or pay a premium. A “gesture” like settling quickly and/or letting a seller stay in their home for a month after settlement might cost a buyer upwards of $5,000 on an $800,000 home, but can be far more positively impacting than were the $5,000 simply thrown at the purchase price.

Hot market real estate stories and agent fish stories can promote the idea that buyers need to load big cannons for every available house on the market rather than assess the firepower they need on a home-by-home basis. It’s not an exact science, but the truth is that excluding a few outliers, out of the properties sold year-to-date in Capitol Hill extended, less than 50% sold at or above full price. Buyers, take heart, the only thing you have to fear is fear itself (and the lack of solid intel).

Alternatively, on the listing side, on average our team's sale price is 3% above list price. And on the buying side, our team's average sale price for our clients is 3% below list price.