How do you win a bidding war in a hot market?

1 Know your budget

Before you enter a bidding war, you need to know how much you can afford to spend on the property. This means getting pre-approved for a mortgage, setting a realistic limit, and sticking to it. Don't let your emotions or the pressure of the competition push you beyond your budget. You don't want to end up with a house that you can't afford or that doesn't meet your needs.

2 Be flexible

One way to win a bidding war is to be flexible with the terms and conditions of your offer. For example, you can offer a quick closing date, a large earnest money deposit, a shorter inspection period, or a rent-back agreement. These gestures can show the seller that you are serious, committed, and easy to work with. However, don't waive any contingencies that are essential for your protection, such as financing or appraisal.

3 Write a personal letter

Another way to win a bidding war is to write a personal letter to the seller, explaining why you love their house and how it fits your lifestyle and goals. A personal letter can create an emotional connection with the seller and make your offer stand out from the rest. You can also include a photo of yourself or your family to put a face to your name. However, be careful not to reveal too much personal information or make any assumptions about the seller.

4 Work with a local agent

A local real estate agent can be a valuable ally in a bidding war. A local agent can help you find the right property, research the market, negotiate the best price and terms, and communicate effectively with the seller and their agent. A local agent can also leverage their network and reputation to get insider information and tips that can give you an edge over other buyers.

5 Be ready to act fast

In a hot market, time is of the essence. You need to be ready to act fast when you find a property that you like and that meets your criteria. This means being available to view the property as soon as possible, making a strong offer right away, and responding quickly to any counteroffers or requests from the seller. You also need to have all your documents and funds ready to go, so you don't delay the closing process.

6 Consider an escalation clause

An escalation clause is a clause in your offer that states that you will automatically increase your bid by a certain amount if another buyer makes a higher offer, up to a maximum limit. An escalation clause can help you stay ahead of the competition and show the seller that you are willing to pay more for their property. However, an escalation clause can also backfire if you end up paying more than the market value or if the seller uses it as a bargaining tool against you.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?