How I won a bidding war on a house without giving the highest bid
- We won a bidding war even though the second best bid had a little more money and a higher payout.
- We made our serious money deposit non-refundable so the seller could keep our money no matter what.
- Giving up serious money is a safe bet for the seller because they still get some money even if we cancel the contract.
During the two months we spent buying houses, my husband and I tried to buy six homes. More than once we lost to an offer that was just a little better than ours. It gave salt to the wound to know that we were so close, but in the end were not selected.
At trial number six, there was another offer that was probably a little better than ours – but the seller still chose our offer. That’s how we won the bidding war.
We did not have the highest bid
Our offer included an escalation clause. This means that we offered an initial amount, but said that we would increase our bid incrementally, if there was a competing offer, up to a certain amount. We received the call that our offer had been selected for the maximum bid.
With an escalation clause, the seller must send you the competing offer to prove that they escalated your offer according to the terms of your contract and not just raised the price because they could. When we looked at the competing offer, we saw that the second place buyer’s maximum amount was actually $ 1,250 higher than ours. They also had a payout of 20% while we only had 3% in payout. But the sellers chose us anyway.
We made our serious money deposits non-refundable
The seller had previously told our real estate agent that the sellers were looking for a combination of an offer with high money but also the safest offer. So to check the “safe” box, we made our serious money non-refundable.
Serious money is a part of yours
payment
that you pay in advance when the seller accepts your offer, just like a deposit. My husband and I made a $ 10,000 deposit and ticked off our offer that we lost the money. This meant that no matter what happened – even though we backed out of the sale for legitimate, legal reasons – the seller would keep the $ 10,000. The seller could access the money right away and use it without worrying about having to give it back to us.
You do not have to lose your serious deposit if it makes you uncomfortable
Losing your serious money makes your offer competitive, but it’s a risk. For us, we decided it was a risk worth taking because we had already given up on a lot of unforeseen events to make our offer competitive, including inspection and title readiness. So we knew it was unlikely we would get our money back anyway.
The $ 10,000 was also not the full amount of our payout, so even though it would have been hard to lose that money, we would not start over from the start if we lost it.
If you are interested in waiving your deposit, you do not have to lose it all from the start, as we did. There are different ways you can do this.
For example, we made an offer on another house that had a septic tank. We said we would lose half of our serious money when they accepted our offer, and the other half after septic inspection. (We did not get that house, but it was not because of our serious money strategy. Someone just offered far more money.)
But just because losing serious money makes your offer more attractive does not necessarily mean you should do it. If losing that money would mean the end of your home buying journey or put you in a dangerous financial situation, you may decide that you are not comfortable taking the risk – and that’s ok. I had to learn which compromises I was comfortable with in the home buying process and which ones I would not shake.