All-cash offers king in bidding wars
Homebuyers with money on hand four times more likely to win: Redfin
The best way to win a bidding war in today’s market? Have cash on hand — and plenty of it.
Homebuyers were four times as likely last year to win a bidding war by making an all-cash offer, according to a report from Redfin. The brokerage said an all-cash offer improved a competitive offer’s success by a staggering 334 percent, far and away the most successful bidding war strategy.
For those who don’t have a lot of liquidity to spare, Redfin’s analysis of thousands of offers written by its agents on behalf of prospective buyers in 2021 also identified other strategies that proved successful.
Waiving the financial contingency — allowing a buyer to cancel a deal if a loan doesn’t come through by the deadline — increased the likelihood of success by 31 percent. Conducting a pre-inspection increased the likelihood for a victory by 25 percent.
Other strategies were less effective. The analysis found that waiving the inspection contingency and putting in an escalation clause didn’t offer significant improvement for prospective homebuyers. Redfin said that might have less to do with the strategies and more to do with how ubiquitous they are, failing to stand out in a competitive market.
Almost 6,000 homes were sold for at least $100,000 above ask in the first month and a half of the year, according to previous data from Redfin. The brokerage said agents should be ready to prepare buyers for sky-high deals.
“I let buyers know what to expect and try to prepare them, financially and emotionally,” Redfin agent Amanda Peterson said. “The home they’re touring will probably sell for significantly over asking price.”
Bidding wars have become harder to avoid as rising mortgage rates and tight supply of homes squeeze the national housing market. Seventy percent of home offers written by Redfin agents in January saw competition, according to the company, the highest rate of bidding wars the brokerage has on record.
“Buyers are feeling more urgency to buy while homeowners are feeling less urgency to sell — an imbalance that’s fueling an increase in competition,” said Redfin chief economist Daryl Fairweather.