Important Updates and Information  →

How to Submit a Competitive Offer in a Seller’s Market

May 14, 2021 | by Katie Claflin

Categories: First Time Buyer, Homeownership, Savings

Low interest rates combined with limited housing inventory are creating unprecedented demand for single family homes. With more interested buyers than available homes, sellers are often receiving multiple offers, leading to bidding wars and increased home prices.

But while simply outbidding the competition is not an option for most, there are other things you can do to help your offer stand out.

  1. Get a Pre-Approval Letter
    A pre-approval letter demonstrates to the seller that a bank is tentatively willing to lend you the money for your mortgage. It will also tell you how much you’ll qualify for, so you can make sure to search for homes you know are in your price range.
  2. Increase Your Option Fee/Reduce Your Option Period
    The option fee is the non-refundable fee that the home buyer pays to the seller to “buy” the ability to cancel the contract for any reason during a specific period of time (the option period).  Increasing the fee and reducing the option period both reassure the seller that the transaction will move forward.  Note: Many lenders and REALTORS® do not recommend that you cancel the option period altogether.  The home inspection is typically conducted during the option period, and it’s very important to be able to withdraw or renegotiate the contract based on the inspection results.
  3. Increase Your Earnest Money
    The earnest money is a good faith deposit that the home buyer puts down to protect the seller if the deal falls through. It is held in an escrow account and applied toward your down payment at closing. In competitive markets it can be very beneficial to increase your earnest money to provide the seller with additional security.
  4. Add an Escalation Clause to Your Offer
    An escalation clause allows a home buyer to increase their offer automatically if they face competition from other buyers. For example, if you want to offer $200,000 for a house, but don’t know what other buyers are offering, your offer could include an escalation clause that states that you’ll beat any competing offers by $1,000 up to $220,000. This allows you to outbid other buyers without offering $220,000 up front.  It's important to note that Texas law prohibits real estate agents from drafting this clause, so if you are interested in including one, you should consult an attorney. 
  5. Include a Personal Letter with Your Offer
    Selling a home is often an emotional decision as well as a financial one, and many sellers want to know that the buyer will appreciate the home as much as they did. It may help to include a letter to introduce yourself and explain what you love about the house and why you want to live there.  However, we always recommend that buyers and sellers work with their REALTOR® when drafting and considering personal letters to ensure they are not violating fair housing laws
  6. Explore Down Payment Assistance Programs
    In competitive markets, offers with higher down payment amounts tend to be more attractive to sellers. Down payment assistance (DPA) programs like TSAHC’s can help you improve your offer by increasing your down payment percentage. TSAHC's DPA also frees up your savings to increase your option fee or cover an appraisal gap if necessary.

Ultimately your lender and REALTOR® will be your best advocates in helping you determine the offer amount and structure that work best for you. You can find loan officers and REALTORS® familiar with TSAHC’s DPA programs here.

TSAHC is also recording a podcast episode on this topic later this summer. Click here to subscribe to our podcast and listen to our other podcast segments.


On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.

Leave a Comment