Here’s the #1 strategy for winning a property bidding war (and a few that don’t work)

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In the US housing market, it still pays to have plenty of cash on hand.

A new report from real estate agent Redfin RDFN,
+2.35%
examined the most effective strategies for winning home bidding wars. The report was based on an analysis of offers Redfin’s agent had made on behalf of its clients looking to buy a home in 2021.

The strategy most likely to win the bidder: Make an all-cash offer. This approach improved the probability of success by 334%, according to Redfin’s analysis.

Two other strategies that improve the odds of winning a bidding war were forgoing the funding contingency and conducting a pre-screen, which increases the odds of success by 31% and 25%, respectively. Both tactics can help close a deal faster, a factor that has clearly resonated with sellers.

See also: How do you compete with homebuyers who can pay cash? Skip inspections and reviews

Importantly, however, Redfin found that two common strategies observed in bidding wars did not result in an improved chance of winning the battle for a house. No improvement was seen when buyers waived the inspection contingency. Escalation clauses also proved to be no more successful. With a price escalation clause, a buyer declares that he is willing to increase the purchase price in response to a higher competing offer.

However, as Redfin notes, both of these strategies have now become so commonplace across the country that they may not be a differentiating factor as they once were.

The likelihood of facing competing home listings has increased during the pandemic. A separate Redfin report found that 70% of deals written by the company’s agents faced competition in January, up from 60% a year earlier.

However, buyers need to exercise caution when forgoing contingencies to ensure they don’t make a mistake in their purchase.

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