Dave Ramsey: How To Choose the Best Offer in a Bidding War for Your House
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Andrew Lisa
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Gary Dudak
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Although prices are starting to ease in some metros and mortgage rates are high, the current real estate market is still mostly defined by stiff competition for scarce inventory. The good news for sellers is, too many buyers fighting for too few houses is a recipe for bidding wars.
Multiple buyers trying to outdo each other with ever-increasing bids is the ideal scenario for sellers, but they only win bidding wars if they know how to create and manage them. If you plan to put your house on the market, financial guru Dave Ramsey has some tips for drawing throngs of eager buyers to your property and spotting the best bid when your listing catches fire.
Start the War: Create Conditions That Attract Competition
You can’t capitalize on a bidding war without multiple bids — and that’s no guarantee in 2023. Ramsey offers two simple ways to put eyes and offers on your house.
Pick a Price That You Wouldn’t Mind Paying Yourself
It was easy to draw droves of buyers during the pandemic-era frenzy when loans were cheap and stimulus money was flowing. But Ramsey thinks that attractive prices are the bait for drawing a crowd in today’s environment.
“When the market’s hot, it can be tempting to dial your asking price up as high as possible,” he wrote on his Ramsey Solutions blog. “But that strategy can backfire on you big time. Too high of an asking price could result in fewer offers and more buyer demands.”
Don’t undervalue your home, but work with an experienced real estate agent with local expertise to establish a fair price that’s in line with comparable properties. Then, it’s all about marketing your home and creating a listing designed to entice. Here, too, it’s crucial to partner with a knowledgeable pro.
Buyers are much more cautious today than they were two years ago, and with interest rates flirting with 8%, they have a lot less to spend. Don’t expect a bidding war — manufacture one.
Set a Deadline To Make Buyers Get Serious
In Ramsey’s experience, you can spur buyers into bidding high by setting a cutoff date for final offers. He told the story of a seller in Nashville named Jen who listed her house on a Thursday and was quickly flooded with prospects.
Ramsey wrote, “By Sunday, 30 people had toured her house, and the offers were rolling in. How did Jen know where to draw the line? Her agent set a deadline: They would only accept offers through 5 p.m. Sunday. That created a sense of urgency and gave Jen a chance to compare the best offers before picking a winner.”
Look Beyond Dollar Signs To Spot the Best Offer
Sellers want to get top dollar for their homes, but the highest offer isn’t always the best. Ramsey wrote, “Tons of factors affect what kind of offer buyers make — and what kind of offer you’re willing to accept. If it turns into a bidding war, you may need a tiebreaker other than price.”
Tiebreaker No. 1: The Buyer’s Financial Profile
A strong bid is meaningless if the buyer can’t back it up. Ramsey wrote, “If they offer more than their lender thinks the house is worth, the buyer may not be able to borrow enough money to cover the offer amount. Hopefully, they have enough in savings to make up the difference — but if not, the whole deal could fall through.”
Ramsey also cautions that approval can drag out with FHA loans, VA loans and other non-conventional packages. He suggests giving preference to pre-approved buyers with conventional loans — preferably 15-year fixed-rate — who put up earnest money to show they’re serious.
Tiebreaker No. 2: Concessions and Contingencies
Another key consideration is what buyers want you to give up and the contingencies they request. “These are conditions the buyer and seller have to meet before the sale is finalized,” Ramsey wrote. “And if one of you doesn’t follow through, the buyer can back out of the deal.”
The most common contingencies include:
- Appraisal contingencies: This caveat lets the buyer out of the contract if the home appraises for less than the offer, which is important because lenders won’t approve loans over the appraisal price.
- Mortgage contingencies: This condition lets buyers back out if they can’t get fully approved for the loan.
- Inspection contingencies: If an inspection reveals flaws, the buyer can ask the seller to pay for repairs, which can be a dealbreaker if both parties can’t agree.
- Home sale contingencies: The buyers agree to purchase the home only after they sell theirs.
Then there are concessions — buyers might request appliances or furniture or even that the seller pays their closing costs.
Tiebreaker No. 3: The Buyer’s Timeline and Yours
In today’s market, selling your home isn’t difficult. The hard part is finding a new one to buy. Therefore, the best bid might be the one that lets you stay put until you sign a contract of your own.
“This factor played a huge part in Jen’s decision,” Ramsey wrote about the Nashville seller. “The winning buyer offered to let her family stay in the house for up to two months after closing. That took a lot of stress out of the sale and gave Jen time to find the right place for her family.”
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