Buyers Tip: Winning the Bidding Wars

Hot real estate markets bring out the worst in everyone. Sellers become greedy and demanding. Buyers become desperate, frustrated and disillusioned. And real estate agents get caught in the middle as they try to negotiate purchase contracts that are acceptable to both sides of the transaction.

Along with frayed nerves, hot markets mean multiple offers will be received for just about every for-sale home. These bidding wars are great for sellers, but they add to the "freaked out" factor for buyers. How can you buy the home of your dreams when several other people are also bidding on it? Here are six tips:

1. Make your best offer. Let's face it, the bottom line is the most important consideration for most sellers. They're naturally looking to sell their home for the highest possible price. If you want to win a bidding war, offering the highest price - something attractively above the asking amount--is a sure way to get the seller's attention. Most sellers who receive multiple offers only seriously consider those at the top of the price heap.

2. Cover the seller's costs. Of course, price is only part of the equation when it comes to the seller's net proceeds from the sale. An offer with a slightly lower price can triumph if the buyer agrees to incur more of the transaction costs. Pay 100 percent of the escrow fees. Purchase your own home warranty, instead of asking the seller to buy it.

3. Show you're serious. Offer to make a large earnest-money deposit and as large a downpayment as you can. Putting more money on the table up-front shows the seller you're serious about the transaction and willing to put your money behind your intentions.

4. Get pre-approved. Attach a copy of your mortgage pre-approval letter to your purchase offer. A prequalification letter is helpful, but a full approval, subject only to an appraisal of the property, is even better. Sellers favor buyers who demonstrate that they're financially able to close the transaction. Agents advise getting your pre-approval letter from a local mortgage broker or lender who has a good reputation among the local agents.

5. Work with a real estate agent who is successful and well-known to other agents. Your agent's professionalism - or lack of it - reflects on you. Also, if your agent will be faxing your offer instead of presenting it in person to the seller, a cover letter should be attached. The letter should be addressed to the sellers and should outline the strengths of your offer. (Making sure the paperwork is neat and legible helps too.)

6. Don't add unusual or unnecessary contingencies or requests to your offer. Sellers know extra contingencies (e.g., the approval of in-laws, the sale of another residence) can delay the transaction or create a loophole for the buyer to bow out of the agreement. Special requests (e.g., the right to purchase appliances or move in early) complicate the offer and distract both sides from more important elements. On the other hand, don't waive standard inspection and financing contingencies unless you thoroughly understand the considerable risks.