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5 Negotiation Tactics That’ll Win a Home Bidding War

These skills may help you ace the competition and land your dream house.

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If you're in the market for a new home, you might have discovered a frustrating truth by now: There aren't as many homes available for sale these days.

See Also on Kiplinger: 7 Reasons Your House Is Still on the Market

The National Association of Realtors reported at the end of July there were 2.13 million existing homes available for sale across the country. That might seem like a big number, but that figure is actually 5.8% lower than during the same month one year ago. And the inventory of homes for sale has fallen for 14 straight months.

This means that when you do find a home that you'd like to buy, you might be bidding against other potential buyers who want the same property.

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How do you increase your odds that you'll actually win such a bidding war? Here are five tips that can make a difference:

1. Get Pre-Approved

The single most important step in winning a bidding war is to make sure that you are preapproved for a mortgage loan.

In a preapproval, a mortgage lender will run your credit and ask for you to prove your monthly income and debts. You'll have to send your lender such documents as your two most recent paycheck stubs, last two bank statements, and last two tax returns. Your lender can then determine how much money it is willing to loan you for a mortgage. To close the process, the lender will send you a preapproval letter stating that it is willing to loan you a certain amount of dollars.

Having this preapproval letter makes you a stronger buyer. A seller knows that you can qualify for a mortgage loan, and that the home sale is less likely to fall through if the seller accepts your offer. If a seller has to choose between a preapproved buyer and one who's never met with a lender? The odds are high that the seller will choose the buyer who boasts that preapproval letter.

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See Also on Kiplinger: 7 Things Home Buyers Hate

2. Make a Full-Price Offer

In the hottest housing markets across the country, a growing number of sellers aren't just juggling offers for their homes, they're juggling full-price offers.

Traditionally, buyers and sellers have haggled over a home's final sales price, with sellers usually lopping at least $5,000 or so off their asking price. But in today's low-inventory markets, this isn't always the case. If you fall in love with a home, be prepared to pay full listing price for it. If you don't, the buyer behind you might be happy to do so.

And you can bet that the seller will gladly accept that full-price offer while ignoring yours.

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3. Go All In

For the best homes in the best neighborhoods, you might have to make an even bigger financial commitment to win a home: Instead of just making a full-price offer, you might have to make a bid even higher than the residence's list price.

This sounds ridiculous. Why, after all, would you ever pay more for a home than what the seller has actually requested? But if you are competing against several other buyers for a home, the winning bid might actually rise over the home's original listing price.

You'll have to determine if you want the residence badly enough to make the unusual move of paying more than the home's original sales price.

4. Offer More Earnest Money

Sellers often request that buyers put down what is known as earnest money when they make an offer on their home. This earnest money — often 1% of a home's purchase price — shows that buyers are serious about purchasing a residence. It is usually nonrefundable if buyers walk away from an offer.

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If you want to make a good impression on a seller, come up with a larger earnest money deposit. This will prove to the seller that you are especially eager to buy their home.

5. Be Flexible With Move-In Dates

Many sellers can't move out of their homes as quickly as buyers want. If you're willing, though, to be flexible with your move-in date, you might be able to win out over bidders who are not as willing to compromise.

Make it clear to sellers that you are willing to move in whenever it's most convenient for them. Making life easier for the sellers could pay off big when you're battling other buyers for a property.

See Also on Kiplinger: What Home Buyers Want Most

This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website.

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This article is from Wise Bread, not the Kiplinger editorial staff.