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Study: Which Tactics Work Best in a Bidding War?

No surprise: Cash offers are the top negotiating tool, and personal letters come in second. However, waiving the inspection contingency didn’t help very much.

SEATTLE – Cash offers are overwhelmingly top way for home shoppers to emerge as a victor in a bidding war. An all-cash offer tends to triple a buyer’s odds of getting an accepted offer when in a competitive buying situation for a home, according to a study from Redfin.

After cash offers, a personal letter from buyer to seller ranked second. They can increase a buyer’s odds by 59%.

Waiving the financing contingency ranked third and can increase a buyer’s chances by 20%, though that’s down considerably from 58% in 2017, the study finds.

Researchers found that two tactics sometimes used in bidding wars have no noticeable affect – have a pre-inspection done or waiving the inspection contingency. Neither one significantly improve a buyer’s chance of coming out on top in a bidding war.

Redfin researchers say they analyzed the most popular bidding war strategies among thousands of offers Redfin agents wrote on behalf of their homebuying customers over the last two years.

“A couple years ago, the market was much more competitive than it is now,” says Daryl Fairweather, Redfin’s chief economist. “Sellers might have had multiple cash bids to choose from, and the offer price more often ended up being the determining factor. Now that bidding wars are less common, an all-cash offer is often enough to make an offer the winning bid. Sometimes, financed offers fall through because the lender decides the buyer can’t afford the purchase or the buyer is too risky a customer. Especially in a less competitive market, sellers value an offer they know isn’t dependent on financing.”

Overall, bidding wars have fallen to a decade low. Redfin says only 13% of its agents offers faced competition from January through September of this year, down from 55% during the same period in 2017.

Source: “All-Cash Offers Triple Homebuyer Odds of Winning a Bidding War,” Redfin (Nov. 19, 2019)

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