How to write a winning offer in a Sellers’ market

In case you haven't noticed, 2015 has ushered in a full blown sellers’ market in Portland
  1. House hunters are out in huge numbers.
  2. Mortgage rates are hovering around the 4% range for best qualified buyers.
  3. Housing inventory is at an 8 year low.
  4. Employment is up.
  5. Lenders are accepting lower down payments.

In a sellers’ market when there isn’t enough inventory to meet the buyer demand, bidding wars for homes become the norm. Bidding wars often strike fear into the hearts and minds of buyers, but we do have tools to help you win a bidding war, if you are willing and able to compete.

Tactics for winning a bidding war in a seller’s market:

  1. bidding wars over homesBuyers need to accept that the list price on most homes is just the starting point for offers. Most homes are selling for considerably higher prices, sometimes even tens of thousands of dollars more than the list price.
  2. Buyers should work with their own agent. Your agent should be keeping an eye on the market for you and keeping you apprised of new listings and price reductions as they come up.
  3. Look at new listings as soon as possible. Homes often sell in just a few days.
  4. Your first offer should be at least asking price. With multiple offers, you may not even receive a counter if your offer is too low.
  5. Write a personal letter to the sellers telling them why you want this house. Be creative and personal.
  6. Make sure your pre-approval is recent (less than 60 days old). Offers submitted without up to date pre-approvals are often ignored.
  7. Offer a big earnest money deposit as a show of good faith and high interest.
  8. Keep your offer clean – NO contingencies except those that are already included in a standard contract.

The escalation clause

In a sellers’ market I suggest using an escalation clause to protect you in cases of multiple offer scenarios. An escalation clause is written into the contract to keep your offer competitive by automatically raising your offer to whatever your maximum price is

On a property with a list price of $300,000, for example, where there are competing offers, you need to assume that at least some of those offers are for more than $300,000. When writing up your offer, you should consider if you are willing and able to pay more, and if so, how much more.

Here’s how I write an escalation clause:

  1. If there is a bona fide competing offer, Buyer will purchase the property for $1,000 more than the NET purchase price of the competing offer, up to a maximum purchase price of $315,000.
  2. Seller is to prepare a counter offer to this real estate agreement with new purchase price based on the proposal outlined above in #1. 
  3. Seller must attach copy of the competing offer with counter offer to buyer. (personal information about competing buyer may be redacted but all terms of contract to be included in copy).

In this example, you are protected from paying more than $315,000, and you could potentially win the bidding war at a lower price. Of course, if there are other offers for more than $315,000, you are now very likely out of the game on this property.

Why use an escalation clause rather than wait for a counter offer?

  1. A counter offer might not be offered if there are other offers higher than yours?
  2. Time to go back and forth on counter offers can work against you because until you have a mutually signed and accepted offer, another buyer can slip in with an offer higher than your counter offer and “steal” this house out from under you. You are never locked in as the buyer until both buyer and seller have signed all paperwork at mutually agreed upon terms.


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