Bidding war real estate, how to bid on a house.

So you're looking to jump in and buy a house right now, and you're like, it's crazy. There's all these multiple offers, bidding wars and all that other stuff. This is how you win in those situations. Let me know what you think about these winning strategies to bid for a house.

So the whole purpose of today's video is to teach you some winning strategies for home buyers. Yes, it is still a very competitive market out there. There are a lot of buyers, and the reason that there are a lot of buyers out there is because even though the rates have jumped up slightly, they're still at very low rates comparatively. There is very low inventory, so there is a huge advantage to the sellers. But in this video, what we're going to talk about is how you, as a buyer, can go in and utilize some of these strategies to get the winning bid for that next house. Oh yeah, and I forgot to mention. At the end, there is a bonus strategy. So make sure you stay tuned to the end to see what that bonus is.

The first way to win is through your earnest money deposit. So your earnest money deposit is your good faith deposit, meaning that if you get the bid that you're going to stick with the contract and abide by the guidelines that were agreed upon, and if you don't, you would forfeit that money to the seller, because they've wasted all their time, energy, efforts, they took their house off the market, stopped showing it to other people so that you, as the buyer, can buy it. If you renege on that, then they get to keep that money, because they lost time with the house on the markets.

As we sit here and we talk about earnest money deposit, what can you do with that? Typically, earnest money deposits average about 1% of the purchase price. So if you're buying a $300,000 house, typically people put down a $3,000 earnest money deposit. If you're serious and you want to win this bid, the thing that I would recommend is to go higher than that 1%. Show them that you're very serious, making an offer that stands out from the rest. And really at the end of the day, your earnest money deposit, it's really just a down payment on your down payment, if that makes any sense.

The second way to win a bid is through your recordation and transfer tax fees. Typically, they are split 50/50 or some combination between the buyer and the seller, but usually, they're split. In the grand scheme of things, these typically average about one and a half percent of the purchase price. So if you want that winning bid, one thing that you can do to make your offer stand out is offer to pay the whole thing. Now, once again, you have to have the funds and all that other stuff lined up to do that, but if that's within your wheelhouse, that is another strategy that helps win bids in this highly competitive market.

The third way to win is through the appraisal gap. In this crazy market, prices have gone up and up and up, especially when you get into multiple offer situations. So if that is the case, one of the things that people are worried about or concerned about, and they should be, is the appraisal. Right? So if you offer above asking price or the home was listed above what market value in that neighborhood is, based on what the appraisal thinks, there could be a little discrepancy if you agree to one price and then the appraisal comes in below that price. So that has been one of those contingencies that really crushes deals.

Usually what happens, the lender will only finance up to that appraisal value. So if you agreed on a price that's here and the appraisal comes in here, that huge gap there in between, that needs to be made up somehow, some way. So you can either renegotiate the contract and say like, "Hey, let's renegotiate this price down to what the appraisal price is," which is not typically what a lot of sellers would like to do. They would much rather just say, "No, we'll cancel the contract. I'll get somebody else that has more money, that can get in here and make up the difference." So if you're one of those individuals and you have the funds to do so, I say that you build in an appraisal gap contingency in the offer that you're writing up. Let them know upfront in an addendum that you are looking to buy this house and, if need be, that you will put in some money to kind of close that appraisal gap. Once again, doing something a little bit different that makes your offer stand out from others.

Ah yes, the good old bonus. Good old bonus strategy here. Now this one is, it's a little riskier. I have not personally done this one. I have heard of other people doing this, and I've seen it on the other side of things, being on the listing side, is what some people do is they make a guarantee to the seller.

So basically, what they do is that earnest money deposit, they said, "Hey, if you will accept my offer, that is a signing bonus. I will cut you. Essentially, we'll have a check sent directly to you right now for that amount of money, that earnest money deposit money, or some other amount. It's a guarantee that if you accept my offer, I'm going to give you that cash right now up front, so that we can get in on this house and get a ratified contract."

I have seen it from the other side of things. It is a pretty effective tactic, if you will, pretty effective strategy for bidding wars and all that other stuff. If you can kind of promise them a little bit of money up front, it makes your offer stand out.

If you need help buying or selling, or you have just questions, you want some info, some insight, please reach out to me. I love helping people buy and sell property.