How To Win a Bid in a Seller's Market

Takeaways About How To Win a Bid in a Seller's Market

• A competitive market with high demand for homes can be challenging for buyers to navigate.
• In a seller's market, you'll first need to calculate your home-purchase budget and get your preapproval letter and earnest money in order.
• A competitive edge can depend on factors such as having more money for the home, fewer to no contingencies, a higher earnest money deposit and a faster close.
• A skilled agent can help craft a firm purchase offer that incorporates carefully considered strategies tailored to your local market.

The housing market is increasingly mixed in 2025, depending on where you look.

In some regions, home shoppers are finding a buyer's market with concessions and negotiable housing prices, but in cities like Seattle, the market still favors sellers, according to real estate sites Zillow and Redfin.

At the housing market's peak in March 2022, sellers received an average of 5.5 offers, according to the National Association of Realtors. Today, the national average is 2.5 offers.

1. Review Your Home Budget and Financial Plans

While it's always important to review your homebuying budget before getting into real estate, it's essential in a seller's market because the winning bid might be more than the listing price. It's easy to become emotionally invested and competitive about your dream home, only to end up buying a house you can't afford.

Use calculators and work with a mortgage advisor to figure out:

• Your credit history and score.
• The amount you have available for a down payment.
• The amount you have available for closing costs.
• Your budget for a monthly home payment, including principal, interest, property taxes, homeowner's insurance and any homeowners' association dues.
• Your debt-to-income ratio.

Ultimately, it's better to wait for the right house to come along, even if it takes longer than you'd like. It's essential not to break your budget just to "win" a home. There will be more houses, although you may need to wait for some aspect of the market or your financial situation to change, whether that's a switch to a buyer's market, falling interest rates or saving more for a down payment.

2. Get Preapproved or Prequalified for a Mortgage

A preapproval or prequalification letter from a mortgage lender demonstrates to sellers your serious intent and that the home sale is more likely to close on time.

"Work with your lender to make sure you have what you need for your offer," said Sarah Bender, builder relationship manager on the BECU Mortgage team (NMLS# 115764). "Your prospective lender can tell you which type of letter they will provide and what is included in the letter."

Talk with your real estate agent about what details will support the strongest offer.

Lenders typically set an expiration date 30 to 60 days after the date of the letter. After this point, you'll need to reapply for preapproval or prequalification again. Your letter doesn't require you to use the lender providing preapproval or prequalification, and you can still shop around to compare rates.

To boost your chances, consider asking for conditional approval that has been reviewed by underwriting. Your selected lender will verify your income, assets, debts and credit record using bank statements, W-2s and other relevant documentation that you provide. This doesn't guarantee approval, but it is the strongest type of preapproval available, according to Realtor.com.

3. Choose an Experienced Realtor 

"I spend a lot of time consulting with my clients upfront," Bolden said. "We review the standard contract so they can understand all the areas of negotiation. We talk a lot about what's happening in the market and what it might take to craft a winning offer. It's important for me to know what they're comfortable with."

4. Prepare a Larger Earnest Money Deposit

Earnest money is a deposit you pay when making an offer on the house, and it acts as a good-faith deposit on the purchase. If the seller accepts your offer, the money is typically held by a third-party entity (such as a title company) in escrow. The deposit demonstrates your seriousness about this purchase and the signed contract agreement.

The deposit is typically around 1% to 2% but you may need to offer a larger earnest money deposit in a competitive real estate market. This could be up to 5% of the purchase price for your offer to stand out, according to Realtor.com.

If you win the bidding war, the earnest money is applied to your closing costs and down payment.

If either party ends the home-sale contract for a reason that's allowed by the agreement, the money is returned to you. If you break the contract for a reason that isn't allowed, the seller may be able to keep your earnest money.

5. Gather a Larger Down Payment

According to one National Association of Realtors report, data showed that homebuyers offering larger down payments were more likely to win the bidding war.

The National Association of Realtors report found that first-time homebuyers offered a typical down payment of 8% which they primarily achieved by selling stocks or bonds, or by withdrawing money from their 401(k) or pension. Repeat homebuyers typically offered 19% down.

On the House Hunt

6. Look at Homes Right Away

According to the most recent statistics from the National Association of Realtors, the majority (51%) of home shoppers find their homes online. Work with your agent to view homes as soon as possible after listing and try to be the first buyer to make an offer (when it makes sense).

Some home sellers will accept offers immediately, while others will have an "offer review date" where all offers are reviewed at once. Your agent will be able to set up an online home search for you that sends email, text or app notifications when a home meeting your requirements comes on the market. 

7. Prepare for a Bidding War: Add Escalation Clauses 

Consider including an escalation clause in your offer to respond in the event of a bidding war.

With an escalation clause, your initial offer will state the price you're willing to pay, but also include a clause offering a certain amount over another buyer's higher bid up to a maximum amount you're comfortable with. To win a bidding war, you'll need to outbid all other offers.

Let's say the home is listed at $550,000 and your maximum cap is $570,000:

• You make your initial offer at the listed price of $550,000.
• Your offer includes an escalation clause that outbids the highest bid by $1,500, up to a maximum of $570,000.
• Bidder No. 2 also offers $550,000 and has an escalation clause of $2,000.
• If bidder No. 2 bids up to $570,000, their offer is accepted. If bidder No. 2 has a cap lower than $570,000, you win the home.

Just remember that the higher a bidding war goes, the higher the mortgage payment and the less available funds you'll have for any home repair or upgrade projects. 

Discuss the pros and cons of escalation clauses with your agent, considering your overall home budget and other individual financial factors. 

8. Reconsider Concessions

In a traditional sales market, a seller may offer concessions to encourage buyers. The seller can pay for certain home-purchase costs such as repairs, along with some or all closing costs, including:

• Loan origination fees
• Inspections
• Title search
• Appraisals
• Agent fees
• Homeowners' association fees
• Real estate taxes

In a seller's market, you're unlikely to receive these concessions, even if you request them. Discuss options with your agent, but avoid requests for concessions, as this can help strengthen your offer.

9. Offer a Flexible or Fast Closing Date

The term "closing" typically refers to the simultaneous transfer of money to the seller and transfer of the property title to the buyer. This is typically done by a third party called an escrow company. After the closing date, the seller gets the money, and you get the keys. You're responsible for the home and the loan.

On average, it takes around 45 days to close on a home, according to information cited by Zillow; however, this timeframe varies by lender.

"Discuss the prospective lenders' timelines for closing and their on-time closing rates before committing to a specific timeframe in your offer," Bender said. "You can also help speed the process along by responding quickly to your lender's requests for documents and information." (BECU closes more than 99% of all home loans on time or before the closing date requested by buyers.) Cash buyers can close in as few as seven days.

A competitive offer could feature a generous closing timeline. Sellers typically want a faster closing date to receive the funds but may desire flexibility in move-out dates or rent-back periods. For example, your agent could offer a closing date of 30 days or less, while allowing the seller 60 days to move out.

Bolden said 30 days to close feels like a long time in a competitive market. She typically tries to submit offers with shorter closing timelines.

"It's important for your agent to have a good relationship with your lender so they can work together and set expectations," Bolden said. "I'll reach out to a lender to ask about their capacity for a faster closing."

After Bidding

10. Stay In Touch — Even if the Winning Offer Isn't Yours

Even if you didn't have the winning bid, in a competitive market, it's still possible that a sale could fall apart. So, ask your agent to stay in touch with the listing agent.

For example, suppose the other buyers must pay the difference between the appraisal price and the price agreed upon in the sales contract, but they are unable to do so.

If the deal falls through, you may have a prime opportunity to make another reasonable offer on the property.

11. Stay Flexible

It can be hard to stay positive if you "lose" multiple houses to competing offers while house hunting. If you can't seem to outbid the competition, consider these strategies:

• Shop in the off-season, such as winter, when competition is less intense.
• Widen your search for new neighborhoods or cities.
• Look for smaller or less in-demand homes, such as condominiums.
• Look for homes in good condition, but with a cosmetically unappealing exterior.
• Wait until the market changes.

Use Caution: Higher-Risk Homebuying Strategies

House shopping can be exhausting, especially if other shoppers repeatedly outbid you and the process drags on for months. Some buyers will take drastic steps, either because they have fallen in love with a house or because home shopping fatigue has set in and they just want to get it over with.

You might be tempted to use strategies that competing bidders were successful using, but it's important to understand and seriously weigh the risks before taking any of these steps. In a worst-case scenario, you could lose all your earnest money or be trapped in litigation with the home seller.

Here are two higher risk homebuying strategies to consider, but these are not recommended for all buyers.

Removing the Inspection Contingency

According to the National Association of Realtors' most recent report, 25% of buyers waive the inspection contingency nationwide. Yet a home inspection contingency provides buyers with the ability to negotiate with a seller if the property needs potentially costly repairs and allows buyers to walk away from a deal if the seller won't address those issues or lower the asking price. Without an inspection contingency, these protections are removed.

Bender pointed out that some first-time homebuyer programs require a property inspection.

In the tight Seattle home market, only about 15% of buyers were able to use the traditional strategy, according to one Seattle-area Realtor's 2023 survey.

The survey found that 85% of sales were using one of these two strategies:

1. Seller's pre-inspection: The seller conducts an inspection and shares the results with potential buyers.
2. Buyer's pre-inspection: A buyer conducts a home, sewer line or pest inspection to determine the bidding amount and strategy before bids are accepted.

The Realtor's survey recommends the latter strategy.

With a buyer pre-inspection, you'll typically be on-site with the inspector for two to three hours. You'll first hear the inspector's verbal findings, followed by a written report. This ensures you understand the home's problems beforehand and helps you avoid a "money pit" home requiring significant repairs.

The disadvantages? You'll need an inspector on speed dial for quick reviews, and you need to devote significant time to multiple inspections. You'll pay the inspector for an inspection even on homes you don't make an offer on. You probably can't change the asking price or get problems fixed — but you'll understand how much the house is worth to you and adjust your price accordingly.

Waiving the Appraisal Contingency or Covering Appraisal Gaps

If you waive the appraisal contingency, you, as the buyer, become responsible for any value difference between the sale price and the appraisal. This gap won't be part of the price negotiation.

"Your lender will still require an appraisal to determine the value of the home; the maximum amount the lender will loan for the home is based on the value from the appraisal," Bender said. "You'll also still need to provide proof that you meet the asset requirements of your mortgage program. Your loan approval could be affected if the cost gap is too large."

Appraisal gaps occur more frequently when appraisers' reports aren't yet up to date with a hot market. According to the National Association of Realtors report, 24% of buyers waived the appraisal contingency.  This means the buyer will provide the cash to cover any appraisal gap.

However, this approach could be financially risky. In Colorado's market, the Colorado Division of Regulatory Agencies noted that they've seen $100,000 over the asking price and appraisal, and "buyers were then obligated to come up with a very significant appraisal gap to get the property."

Speak with your lender about your personal situation and the suitability of waiving any appraisal or financing contingencies in the Seattle market.

Q: How Can I Tell If I'm In a Buyer's or Seller's Market?

Here are the key features of a seller's market versus a buyer's market.

Q: Is a Personal Letter a Good Idea?

In the past, buyers may have written a personal "love letter" in a seller's market to stand out from the competition. This letter was submitted with the buyer's offer. However, recent Realtor.com advice suggests that these letters could lead to biased decision-making that violates federal housing law, rather than an objective decision.

Q: Does Making a Cash Offer Help in a Seller's Market?

Yes, making a cash offer can help you win a bid in a seller's market. Home sellers may prefer all-cash buyers because these offers eliminate the need for mortgages and the longer timeline associated with financing. Around 25% or more of buyers purchase a home with an all-cash offer and don't get a mortgage, according to the National Association of Realtors.

Q: How Do I Make a Competitive Offer?

To make a competitive offer, consult with your Realtor, who will understand the key factors influencing your market. To win a bidding war, it may simply require offering more than the listing price, or it could involve making numerous concessions. Consider these important factors and don't make an offer you feel unsure about or can't afford.

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