Debunking Winning Realty Bidding War Strategies

Boulder’s real estate market, like much of the Colorado Front Range, faces challenges from multiple offers. Implement a successful strategy to ensure winning realty bidding war for your dream home. There are opportunities to strengthen your offer to beat out the competition.

Once upon a time, it was simpler. You viewed some homes for sale, made an offer in the ballpark of the Seller’s price and proceeded through the real estate contract and into your new home.

Certainly, that sounds nothing like the frantic, multiple offer insanity gripping the region. A decade ago it would have been easier to predict the Coronavirus Pandemic than the unbelievably hot, limited inventory Boulder real estate market we are living in today. Oh, and that pandemic is adding fuel to the fire, with trends suggesting people are rapidly leaving major city centers to be in quieter communities.

In 2021 Colorado home buyers need winning realty bidding war strategies more than ever. But which ones truly work and which don’t? After all, there is nothing worse than walking into the perfect home, making a bid that meets the Seller’s expectations and then learning the house sold to someone else. Worse still when you discover that someone else paid a price you would have eagerly met to have your dream house.

The Seller Love Letter

When I started in residential real estate in 1995, it was common to jot a cover letter to accompany the Colorado Contract To Buy And Sell Real Estate. The agents mentoring me explained, “this is an opportunity to let the Seller know some of the defects and shortcomings of their house. It helps with the negotiations over price.”

You read that right. A couple decades ago, the prevailing wisdom was to beat up sellers on their house. Cut to the 2021 Boulder realty market and everything is turned on it’s head. Today, savvy home buyers are writing personal love letters to accompany their offer. In hopes of having the winning bid.

Why Seller Love Letters Don’t Work


Well, it’s more complicated than that, but there are legal perils associated with these letters to home owners. Foremost is the risk of violating fair housing rules. When a buyer emphatically writes that the home will benefit them as the buyer in some particular fashion, that letter might give clues to who the buyer is. Should the Seller select a different competing offer, for whatever reason, it’s been shown that the losing bidder sometimes feels they were discriminated against for the very reasons they laid out in their letter.

Louisville home sellers need to be cautious. Reading a personal letter could expose them to claims of bias related to fair housing. Owners can face penalties into the six figures for making a decision to sell based upon race, familial status, age or sex. The most recent policy positions which guide the Colorado Realtor community recommend not incorporating these personal letters.

Buyer Letters Work

My clients have succeeded with a number of love letter strategies in the past. On some occasions, real estate clients agreed to shoot videos. Pro: very good way to bond. Con: not everyone likes to be on camera. Using the video strategy helped clients beat out a higher positioned offer in one instance. At the closing, the sellers told us, “when we saw that video and shared it with our adult daughter, she said ‘Mom and Dad, that’s the buyer of our house.”

In another transaction, representing the Sellers, a personalized seller love letter was winning realty bidding war power play. That letter really tugged at my clients’ hearts. It’s sincerity got to the sellers and they felt they had to take that particular offer. Even though there were similar offers with fewer contingencies.

2021 Touch On Buyer Love Letters

Starting late last year, I started seeing the buyer love letter incorporated into the cover letter from the buyer’s agent. Not strictly speaking a love letter, the agent is avoiding having the letter in the offer. But still, it’s an opportunity to plead the home buyer’s case.

Making The Highest Offer Is No Guarantee Of Winning In Multiple Offers

True, the best offer can give clients more opportunities to win in a bidding war. But, its false believe the highest offer is winning realty bidding war every time. Let’s look at a few scenarios where less is more.

  • Cash versus Mortgage. Lower value cash offers can be very competitive versus buyers with financing. Why? No appraisal or loan approval. Twu issues that can really impact a contract on the road to closing.
  • FHA vs Conventional. Listing agents in the know understand that FHA is a Federal guideline loan program. Buyers can object to the appraisal up to or on the date of closing. Conventional notes, by comparison, are locked into the contract dates for objecting to a low appraisal. A lower price conventional offer — especially when there is appraisal concern — can outshine a higher valued FHA deal any day of the week.

There can be outside influences. Several years ago, my buyer client Alec wrote a letter about an interior feature. The condo had columns. I had hardly noticed these. Alec spoke of how they reminded him of Italy where his girlfriend was doing study abroad – and incorporated that in a buyer love letter to the owners.

Guess what? I got a phone call from the listing agent. Our offer wasn’t the highest or the best. But the owner really liked the letter. We were given an opportunity to match the highest price. And Alec got his condo!

Cash Is King, Not!

Along the lines of the highest and best price, is the idea of bringing an all-cash offer. Cash offers for Boulder homes for sale generally have no appraisal. There is definitely no loan approval.

So all cash must be better than an offer getting financing, right? Wrong. This is a myth. I’ve seen some worst case reasons why clients want to be exceptionally weary when it comes to a ca$h buyer. Most notably, the investor buyer who makes a great cash offer, followed up by dozens of inspections and tests in search of issues to beat up owner on pricing.

In one transaction the buyers inspected every system with a professional, with an eye on finding issues. They brought in an environmental unit testing for mold, radon and structural defects. Then shared all those reports with the Seller. The idea being: either work with the buyer to lower the price or be forced to share these negative reports with potential future buyers. Fear of future loss can be a biggie for a home seller Solution: don’t rush to the cash buyer when receiving multiple offers.

Besides, mortgaged home buyers have a readily available trick to counter an all cash deal. It involves the appraisal.

For home buyers that are going the cash route, provide Proof of Funds with your offer. This is a powerful way to say, “I’m buying with cash and I have the cash.” Also, consider closing quickly. Since the only deadlines will be inspections, title and possibly surveys, closing much faster can be a benefit to the home owner.

Agree To Meet Any Appraisal Shortfall

This winning realty bidding war strategy has buyers agreeing to bring any shortfall due to a low appraisal to the table in addition to the originally agreed upon terms. This strat is good, because it can counteract an all-cash buyer’s claims of no appraisal.

But it can require a home buyer to bring additional funds to close. Don’t confuse an appraisal with a home inspection

This is also one of those additional provisions that isn’t always what it seems. I mentioned above that FHA mortgage applicants can terminate up to an including on the day of closing due to Federal guidelines. This includes on deals where the home buyer agreed to cover an appraisal shortfall.

Escalation Clauses Are Sure Fire Win 24 Seven

Alas, not necessarily. In case you are unfamiliar with the terminology, and escalation clause works like this. The buyer makes an offer and agrees to beat any other offer by X number of dollars up to a limit of Y new price. Sometimes there is no limit. Rocket Mortgage blogs on the value of an escalation clause in this post from October.

Why These Escalation Clauses Fail

Some home buyers will say, in their Boulder contract to buy and sell real estate, I want the house for as little as possible, but I’ll beat any other offer to win by “this many dollars.”

Consider two offers. One is at full price with an escalation clause beating any other offer by $2,000. The second is at $35,000 over list price. That first offer is now worth $37,000. It’s winning the bidding war. But this is where emotions can run high. From the seller’s perspective, one buyer only offered full price, while the other offered an extra $35,000 right off the bat. All things being equal, that original offer of $35K over list price sounds most sincere. That offer could easily win a bidding war in Boulder.

Second Place Buyers Win Over Escalation Clauses

There is also the risk that a buyer using an escalation clause will get cold feet after successfully winning realty bidding war. I’ve seen this first hand.

True story. My clients submitted a super strong offer on a Denver bungalow with a really neat breezeway connecting the garage and house. It was a one-of-a-kind home. By early afternoon the listing agent was calling me “Hun,” taking my calls and had me feeling good about our offer.

That all changed about five pm. She texted me saying the seller was reviewing offers and wouldn’t make a decision until the early morning the next day. The agent was no longer answering my phone calls. Intuition suggested there was a better offer on the table. The buyers, dejected and on East Coast time, decided to call it a night at our 8:30 pm (their 10:30).

Five minutes after that, the listing agent suddenly calls me, all chipper. She says, “Hun, your offer is great and the Sellers want to make a deal with a couple of minor date changes.” Miraculously I was able to reach my buyers in Georgia at their eleven pm and put that deal together. When we closed the transaction, the listing agent admitted what I suspected. There had been a higher offer with an escalation clause. But when it came time to put up or shut up, they got cold feet.

Make The Highest Priced Offer To Win Bidding War, Pt II

More often than not, Longmont home buyers don’t know what the other bid offers are on the table. Especially in a multiple offer scenario. Making the highest offer can be a bit of a challenge. Back in 2012, as this Seller’s Market was just getting started, I suggested clients Becca and Tony offer $2,000 over list price to win a bidding war. It worked. We had the highest and best offer.

Four years later, my clients Erik & Laura enthusiastically offered eleven and a half percent over full price to win a bidding war – that was an amount north of $50,000 over list price.

It can be challenging to guess correctly what the highest offer needs to be for winning realty bidding war. No one wants to be so far over the top they freak themselves out and walk away from the winning bid either. Nor do you want to win the bidding process and then find out the property simply won’t appraise.

Sellers see this too. An owner may feel their house is worth a certain maximum price. Taking a solid, if lower priced offer, can make better financial sense, because that offer has the greatest likelihood of successfully closing.

Winning Realty Bidding War Offers Waive Contingencies

These are some scary sounding suggestions to overcoming multiple offers. While love letters are on the decline in 2021, these strategies remain strong and simple. The Colorado Contract to Buy and Sell real estate has provisions for everything from a home inspection to appraisal to loan approval built right into the contract.

That doesn’t mean you have to keep these provisions in the contract.

Removing can or two can make your bid much more attractive. By themselves, removing a clause might be insufficient to win vs multiple offers. In conjunction with other strategies, this can be the icing on the cake to put a home buyer over the top, getting the win. Getting the house!

Waiving Inspection Objection Contingency

There are houses where this is a natural winning strategy. The owner is advertising several new appliances, the roof is less than three years old, the furnace was replaced five years ago. Showing the house, its immaculate. The yard is in good order, the tools in the shed are neatly organized. Not a blade of grass feels out of place. Why not waive the inspection? There aren’t many facets of the house at risk to the buyer.

As a lesser version of this option, I’ve represented sellers where the buyer’s additional provisions state only health and safety issues will be a concern. I don’t like that particular line. I’ve found you can argue nearly any inspection issue is a health and safety concern. And the buyer can still walk on the contract’s objection deadline.

Regardless of waiving or having, do inspections promptly. It is commonplace for home inspections to take place in the first seven to ten days of a contract.

Waiving Financing Contingency

This can be a solid maneuver for winning a real estate bidding war. Dropping the formal loan approval removes one more deadline. Sellers love it. For a home purchaser, take the time to get pre-approved, not merely pre-qualified. By this, I mean have your financing done to the point it is contingent upon recertification of income, title insurance and appraisal. Sarah Davis suggests prior approval in her blog Money Under 30.

Now you know you are getting the loan and are more like a cash home buyer. Great strategy, only downside maybe insufficient by itself to wind a bidding war versus multiple offers in 2021.

exterior 2324 glacier court house in black and white with a truly blue cloud filled sky behind

The Ultimate RealEstate Winning Bid

While any one of these strategies might lead to success or be debunked in the coming years as no longer effective, Boulder home buyers are advised to keep one fact in mind. The best, most winning-est strategy might be to incorporate several winning realty bidding war strategies into your offer. Jot a note to the seller that your buyer’s agent can incorporate into the cover letter, waive a contingency and agree to cover an appraisal shortfall. Up the earnest money deposit to look financially strong. Include an escalation clause to take your better than full price offer over the top of any competitor. That’s the sort of offer that wins in this housing market.

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