A Redfin survey of agents found all-cash offers 334% more effective in bidding wars – but escalation clauses and waiving inspection contingencies had little impact.
SEATTLE – It’s apparently true: “Cash is king.”
Prospective homebuyers who offered all cash were more than four times as likely to win a bidding war as those who didn’t in 2021, according to a new report from Redfin. It makes all-cash offers the most effective strategy by far to win a home when there are multiple offers.
Two other tactics also do some good: Waiving the financing contingency and conducting a pre-inspection, both of which help a deal close faster, are also effective. Buyers who used those strategies were 31% and 25% more likely to win than those who didn’t, respectively.
However, two other common strategies – using an escalation clause or waiving inspection contingencies – didn’t do as much good, perhaps due to the fact that both are fairly common and don’t give any individual buyer an edge.
Bidding-war strategy – Improved a competitive offer’s likelihood of success
- All cash: 334%
- Waive financing contingency: 31%
- Pre-inspection: 25%
- Waive inspection contingency: Insignificant
- Escalation clause: Insignificant
Redfin says more than half its agents offers faced competition in each month of 2021 and competition has only intensified since then, with January 2022 the most competitive month on record. Competition contributes to rapidly rising home prices; More than 30% of U.S. homes sold above list price each month last year, a percentage that climbed to 43% in February.
Competition could ease some by the second half of the year if the supply of for-sale homes increases and mortgage rates rise, but bidding wars are still likely.
Redfin agents also recommend considering other strategies, such as offering more than the asking price and waiving the appraisal contingency.
“I let buyers know what to expect and try to prepare them, financially and emotionally. The home they’re touring will probably sell for significantly over asking price,” says Fort Worth, Texas, Redfin agent Amanda Peterson. “We have detailed conversations about how much over asking price they’re willing to go and which contingencies they can waive. If a buyer has a low down payment or another scenario that doesn’t typically win a bidding war, I’ve had success explaining buyers’ unique situations to the listing agent and making it clear that their finances are reliable and the deal will close.”
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