Redfin Reports All-Cash Homebuyers Are Four Times More Likely to Win a Bidding War

Rhea-AI Summary

Redfin (NASDAQ: RDFN) reports that homebuyers making all-cash offers were over four times more successful in winning bidding wars in 2021 compared to those who financed their purchases. Additionally, waiving financing contingencies and conducting pre-inspections improved winning chances by 31% and 25%, respectively. Despite these strategies, common tactics like waiving inspection contingencies did not significantly enhance success rates. As competition remains high, with over 30% of homes selling above list price, Redfin agents advise buyers to prepare financially and emotionally for a competitive market.

Positive

• All-cash offers are highly effective, enhancing winning chances by 334%.
• Strategies like waiving financing contingencies and conducting pre-inspections improve odds of winning bidding wars by 31% and 25%, respectively.

Negative

• Common strategies such as waiving inspection contingencies and escalation clauses offer no significant improvement in winning chances.

Cash is king when competing for a home, but a buyer’s odds of winning a bidding war also increase significantly by waiving the financing contingency or conducting a pre-inspection

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — Prospective homebuyers who offered all cash were more than four times as likely to win a bidding war as those who didn’t in 2021, according to a new report from Redfin (www.redfin.com), the technology-powered real estate brokerage. This makes all-cash offers by far the most effective strategy to win a home when there are multiple offers.

Waiving the financing contingency and conducting a pre-inspection, both of which help a deal close faster, are also effective strategies. Buyers who used those strategies were 31% and 25% more likely to win than those who didn’t, respectively.

Bidding-war strategy	Improved a competitive offer’s likelihood of success by … (2021)
All cash	334%
Waive financing contingency	31%
Pre-inspection	25%
Waive inspection contingency	No significant improvement
Escalation clause	No significant improvement

Escalation clauses and waiving the inspection contingency don’t increase potential homebuyers’ chances of winning a bidding war. That’s likely because those strategies are so common in a competitive market, and often don’t benefit one buyer relative to the competition.

Effective bidding-war strategies are especially important for homebuyers in today’s market, with a limited number of homes for sale making each one a hot commodity. More than half of Redfin offers faced competition each month of 2021 and competition has intensified, with January marking the most competitive month on record. Competition for homes is contributing to rapidly rising home prices, with more than 30% of U.S. homes selling above list price each month last year. The share has since increased, climbing to 43% in February.

Competition could ease some by the second half of the year if the supply of for-sale homes increases and mortgage rates rise, but bidding wars are still likely to be commonplace.

Redfin agents also recommend considering other strategies, such as offering more than the asking price and waiving the appraisal contingency

Buyers who can’t afford to pay in cash can still find ways to stand out from the crowd.

Fort Worth, TX Redfin agent Amanda Peterson said she always educates her clients about the likelihood of competition and advises them to get their finances prepared, especially in the current market where there’s such low supply.

“I let buyers know what to expect and try to prepare them, financially and emotionally. The home they’re touring will probably sell for significantly over asking price,” Peterson said. “We have detailed conversations about how much over asking price they’re willing to go and which contingencies they can waive. If a buyer has a low down payment or another scenario that doesn’t typically win a bidding war, I’ve had success explaining buyers’ unique situations to the listing agent and making it clear that their finances are reliable and the deal will close.”

Redfin agents also report that it’s common to put in offers above the asking price–which means buyers may want to start their search with homes listed below their price range. Many buyers are also waiving the appraisal contingency, which means the buyer commits to paying the agreed-upon price, even if the appraisal comes in lower. While Redfin’s data doesn’t track this strategy, it has become increasingly common in recent years, according to Redfin agents.

To read the full report please visit: https://www.redfin.com/news/2021-bidding-war-strategies-all-cash

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, instant home-buying (iBuying), rentals, lending, title insurance, and renovations services. We sell homes for more money and charge half the fee. We also run the country's #1 real-estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can take an instant cash offer from Redfin or have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 6,000 people.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220314005176/en/

Redfin Journalist Services:

Ally Braun, 206-588-6863

press@redfin.com

Source: Redfin

FAQ

What did Redfin's new report say about all-cash offers?

Redfin's report indicates that all-cash offers were over four times more successful in winning bidding wars in 2021.

How much did waiving the financing contingency increase winning chances according to Redfin?

Waiving the financing contingency increased the likelihood of winning by 31%.

What impact did pre-inspections have on the success of homebuyers?

Conducting a pre-inspection improved the chances of winning a bidding war by 25%.

What percentage of homes sold above list price recently according to Redfin?

Over 30% of U.S. homes sold above list price in 2021, climbing to 43% in February.

What strategies did Redfin recommend for homebuyers facing competition?

Redfin recommended offering above the asking price and waiving appraisal contingencies.