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How to strategically win a bidding war

The Philadelphia housing market is becoming increasingly competitive. As the economy blossoms and the unemployment rate goes down, new homes can’t be built quickly enough. For house hunters looking to purchase in the city’s best neighborhoods, even finding a property for sale is challenging, much less seizing the opportunity and landing a contract.

Today’s fierce housing market creates a best-case scenario for many sellers. Nearly 24 percent of homes that sold in the U.S. in 2017 sold for more than the asking price, including nearly 17 percent of homes sold in Philadelphia. As you search for the home of your dreams, you need a plan to land the property once you’ve found it and recognize you’re competing with other homebuyers who are equally determined. Here are four strategic steps to help you win a bidding war.

Know the property

The best possible outcome is to avoid a bidding war altogether. You and your real estate agent should have a thorough understanding of the property, the seller and the seller’s situation. When a property is priced at or below its market value, the seller will likely receive multiple offers. Keeping that in mind, it may be best to make your initial offer more than the asking price, so as to immediately ward off any threat of competition. The seller may be very motivated to empty their hands of the property, or could be emotionally attached. Your agent can help you analyze the situation and craft an offer strategically, rather than just throwing out a number.

All cash

Cash is king in real estate. If you have the means to make an all-cash offer on a property, you’re all but moved in. The Wall Street Journal reports an all-cash offer improves your success rate of getting the property by 97 percent. In the luxury market, defined as the top 10 percent of properties based on list price, it’s a 438 percent increase.

Waive financing contingency

The financing contingency clause in a buyer’s offer means the buyer will purchase the home at the agreed-upon price only if the lender approves the mortgage for the set amount. Eliminating the financing contingency clause can be risky, as it means you have to come up with the difference in cash or walk away and lose your earnest money deposit if the bank doesn’t approve a mortgage for the sale price, but it is effective. Waiving the financing contingency typically increases the chances of closing by 58 percent.

Get personal

A home holds a lifetime of memories, and a seller with an emotional connection to the property may find it reassuring to know your personal story as the potential next owner. In addition to your offer, include a personal cover letter that explains your appreciation for the home and what it would mean for your future. Adding a personal touch to the offer may swing the seller’s decision, especially when they’re selling for a reason other than money.