How I Won a Bidding War on a House Without Making the Highest Bid

  • We won a bidding war even though the next best offer had a little more money and a higher down payment.
  • We made our security deposit non-refundable, so the seller could keep our money no matter what.
  • Waiving the bond is a safe bet for the seller, as they will still receive some money even if we cancel the contract.

In the two months we spent buying houses, my husband and I tried to buy six houses. More than once, we lost to an offer that was slightly better than ours. It added salt to the wound knowing that we were so close, but in the end we were not chosen.

On try number six, there was another offer that was arguably a little better than ours, but the seller took our offer anyway. That’s how we won the bidding war.

We did not have the highest offer

Our offer included an escalation clause. This means that we offered an initial amount, but said that we would increase our offer gradually if there was a competing offer, up to a certain amount. We received the call that our offer had been chosen at the maximum offer.

With an escalation clause, the sales agent has to send you the competitor’s offer to show that they escalated their offer according to the stipulations of your contract and didn’t raise the price because they could. When we looked at the competitor’s offer, we saw that the 2nd place buyer’s maximum amount was actually $1,250 higher than ours. They also had a 20% down payment, whereas we only had a 3% down payment. But the sellers still chose us.

We made our security deposit non-refundable

Previously, the listing agent had told our real estate agent that sellers were looking for a combination of a big-money deal, but also the safest deal. So, to check the “secure” box, we made our guarantee money non-refundable.

The earnest money is a part of your


Deposit

You pay up front once the seller accepts your offer, kind of like a security deposit. My husband and I put down a $10,000 earnest money deposit and marked our offer that we lost the money. This meant that no matter what happened, even if we backed out of the sale for legitimate legal reasons, the seller would keep the $10,000. The seller could access the money immediately and use it without worrying about having to pay it back to us.

You do not have to forfeit your security deposit if you are uncomfortable

Forgoing your earnest money makes your offer competitive, but it’s a risk. For us, we decided it was worth the risk because we had already waived many contingencies to make our offer competitive, including inspection and title contingencies. So we knew we were unlikely to get our earnest money back anyway.

The $10,000 was also not the full amount of our down payment, so while losing that money would have been difficult, we wouldn’t be starting from scratch if we lost it.

If you’re interested in forgoing your deposit, you don’t have to lose everything up front like we did. There are different ways to do it.

For example, we made an offer on another house that had a septic tank. We said that we would lose half of our deposit when they accepted our offer and the other half after the septic inspection. (We didn’t get that house, but it wasn’t because of our earnest money strategy. Someone just offered a lot more money.)

But just because losing the security deposit makes your offer more attractive doesn’t necessarily mean you should. If losing that money would mean the end of your homebuying journey or put you in a dangerous financial position, you may decide you’re not comfortable taking the risk, and that’s okay. I had to learn which compromises I felt comfortable making in the home buying process and which ones I wouldn’t accept.

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