In the U.S. housing market, it still pays to have a ton of cash on hand.
A new report from real-estate brokerage Redfin
examined the most effective strategies for winning bidding wars for homes. The report was based on an analysis of offers made by Redfin’s agent on behalf of their clients who were looking to buy home in 2021.
The strategy most likely to have a bidder win: Making an all-cash offer. This approach improved the likelihood of success by 334%, according to Redfin’s analysis.
Two other strategies that were found to improve the odd of winning a bidding war included waiving the financing contingency and conducting a pre-inspection, which increases the chances of success by 31% and 25%. Both of these tactics can help a deal close more quickly — a factor that clearly found favor with sellers.
Also see: How do you compete with home buyers who can pay in all cash? Skip inspections and appraisals
Importantly though, Redfin found that two common strategies seen in bidding wars didn’t result in an improved chance of winning the fight for a home. No improvement was seen when buyers waived the inspection contingency. Similarly, escalation clauses weren’t shown to be more successful. With an escalation clause, a buyer notes they are willing to increase the purchase price in response to a higher competing bid.
As Redfin notes, though, both of those strategies have become so commonplace across the country at this point that it may not represent a distinguishing factor like it once did.
The likelihood of facing competing bids on a home has increased throughout the pandemic. A separate Redfin report found that 70% of the offers written by the company’s agents faced competition as of January, up from 60% a year earlier.
However, buyers need to exercise caution when waiving contingencies to ensure they don’t find themselves making a mistake with their purchase.