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How can buyers win a bidding war in 2025? With Utah's booming real estate marketing in 2021 and 2022, we have seen homes with up to 27 offers and we were able to secure that home for our buyer. Here are some of the strategies that we use.

Traditional Terms

Let's talk about some of the traditional terms. Obviously, price matters. If you are not the highest price, you better make up the difference with some of these other terms that we're going to talk about. But if you're in a bidding war and you're competing against other individuals, and other buyers, you're going to need to be at the top of the list regarding price. Now, financing.

What I mean, is it matters if you're 3% down versus 5% down versus 25% down. Now, it doesn't mean everything, but if I'm representing a seller and there's an offer of 3% down competing with 25% down, the 25% down is much more attractive. Mainly for the reason that in today's market, there's a high chance that we may see or receive an appraisal waiver or have a less stringent appraisal if there's 25% down on the property. Whether appraisers or banks say it or not, they are there to just manage their risk. And so if a buyer's putting down 25%, there's much less risk for the bank and we tend to have fewer appraisal issues in my opinion and my experience. The other terms associated with that are earnest money and closing date. Does the seller want some flexibility there? Are they looking for the quickest close possible?

Some of those more traditional terms do matter, and you definitely want to reach out to the listing agent to understand what's best for the seller so that you can position these terms in the best possible way. Now, as is, this refers to going into an agreement, basically agreeing upfront that you are not going to ask the seller for any credits or repairs after the inspection. This doesn't mean that you're waiving the inspection. You will still do one in this case, however, you are giving the seller peace of mind that you're not going to be asking them for credits or repairs.

In my experience, that's worth three or $4,000 based on what the typical ask is after an inspection. Now, this is something very interesting that we're seeing more and more of. This is providing some sort of appraisal gap coverage. Let's say a house is listed for $380,000 and we are going to offer $400,000 for it, now that might be the market price because there are four or five offers and you're in a bidding war. We probably expect that house to sell for $400,000. We are comfortable that is the market value based on all the competition that we have with the other buyers.

Cover Appraisal Gap

However, is the bank going to feel the same way and are appraisers going to appraise that house at $400,000? Well, if you're a buyer and you can offer some sort of gap coverage to the seller, meaning you'll cover an appraisal gap, that is huge for a seller because it can help solidify their bottom line upfront. Because in that example, if that home were to appraise, let's say, for $390,000, you're going to have to renegotiate that deal. The bank is only going to lend against the value of $390,000, not $400,000 that you went into the contract at.

This is very, very attractive for sellers if a buyer can go in and say, Hey, no matter what the home appraises for, we are going to cover the difference or more typical, they might put a cap on that. They might say, we will give you $10,000 in gap coverage. Meaning if that home appraises $10,000 light versus what you were under contract at, the deal will hold together. It'll be already determined that the buyer is going to bring those additional funds, and you will not have to renegotiate the deal. This is something we're seeing more and more of. It's very smart because sellers, number one worry in today's market is, is the home going to appraise? Now escalation clauses, this is a way to actually submit your offer upfront. And this is a way of basically saying your offer price will be in relation to the next highest offer price.

Maybe instead of offering $400,000 in the example that we just played out, you could say, we're going to offer a floor of $380,000 and we're going to submit an escalation clause that says we will beat the next highest offer by $2,500 up to a cap of $400,000. If the next highest offer was $370,000, we would've paid $380,000 because that was the floor that we set. However, if the highest offer excluding ourselves was $390,000, this escalation clause then would say that we would have to beat that by $2,500, so we would actually be offering $392,500. This is really smart because it's a way to ensure you're the top offer. If you leave it open-ended you for sure do, but if you put a cap on it could save you a few thousand dollars if instead of going in at $400,000, there's a chance that you could get it for under that amount even though your cap is $400,000.

Waive the inspection

The next one is not super common in our market. I don't love this, but it's something that some people will do to win a house. And that is to waive the inspection altogether. That is basically where you're not going to even go in with an inspector at all. And you're going to basically agree to contract terms. This would be a very aggressive thing to do as a buyer. This is something I wouldn't necessarily recommend, however, some experienced investors, let's say, or people that have done this a lot may decide they're going to wave inspection. Or if it's a home that's 2, 3, 4, 5 years old, that's fairly new in good shape maybe somebody would wave inspection in that example.

Non-refundable Earnest Money Deposit

Another lever would be that you could offer non-refundable earnest money. If there's a poor inspection, you can almost certainly get out of that deal. There are also finance contingencies, so on and so forth. But if you were a buyer and if you offered to the seller that if you didn't get to the closing table for whatever reason that your earnest money would be nonrefundable, that would take a ton of risk off the seller's plate. And it wouldn't matter why that deal didn't get to the closing table. If it didn't, that seller would keep the earnest money. That is something, again, not super common in Utahs real estate market, but I know other markets, this is common.

Be Flexible

And so it would be an aggressive offer and something that sellers would really like. Now, lastly, we're getting into some of the miscellaneous terms that you could offer. Really showing your flexibility to the seller. Something that we're doing quite a bit is offering the seller flexibility to rent back their house after we close on it. Many sellers are in a situation where they know they can't be competitive if they want to go buy their next house with a home sale contingency on their offer, meaning that they to sell their house in order to buy the next one. What's best for that seller potentially is that they sell the house that they live in now, they clear their funds, they get all their money in hand, and then they rent back their own house for 2, 3, 4 months, allowing them to write a non-contingent offer on their next house.

You, as the buyer of their home, would afford them a ton of flexibility, and you would allow them to be more competitive in their purchase to offer them a rent back. We've also had people, buyers offer to rent back at a very low cost to the seller, which is even better. However, just providing them flexibility, whether it's a long close, a quick close or a potential rent back is just a way to sweeten the offer. Something that you can do other than just offers the highest price. Hope this gives you some ideas and some insider secrets on how you can win in a bidding war.

If your looking for a licensed Utah real estate agent give us a call at 435-414-8597

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