How to Win a Bidding War When Buying a House in Idaho
July 6, 2021
From Coeur d’Alene to Treasure Valley, Idaho’s residential real estate market has exploded over the last year. Homes across the state sell quickly -- within just a few days of listing on the market -- and often sell above the asking price. Market watchers credit this to the influx of Californians, Oregonians, and Washingtonians moving into Idaho from the West Coast. West Coasters have abandoned California, Oregon, and Washington in droves, searching for less expensive places to retire and better career opportunities. Unfortunately for prospective home buyers, those relocating from the West Coast have brought their deep pockets and their housing crisis to Idaho. For prospective homeowners, this means a fiercely competitive housing market in Idaho’s fastest-growing cities. Follow below to learn more about how homebuyers in Idaho can make themselves more competitive as they vie for their dream homes.
Understanding the Idaho Housing Market in 2021
In our recent post “Top 10 Reasons People are Relocating to Idaho,” we noted that home prices have exploded across Idaho in the last several quarters. We referenced a recent report by KTVB7 that revealed home prices in “Idaho surged the most [in the United States last year] with a year-to-year increase of 14.4%.” Boise has seen the most significant growth in housing costs of any city in Idaho, with Lakeside closely following. In an April 2021 article for The Wall Street Journal, Nicole Friedman noted that "the picturesque lakeside city of Coeur d’Alene, Idaho, tops the list of the country’s hottest emerging housing markets, according to a new ranking launched Tuesday."
While Idaho has dominated real estate market news in recent months, its property values have actually steadily increased over the last three decades. According to the Federal Housing Finance Agency, “the median home in Boise has appreciated 391%” since 1991. Of course, the emergence of a competitive tech center in Boise -- one that rivals Silicon Valley, Seattle, and Silicon Beach -- skyrocketed values in 2020. Realtor.com notes that “in May 2021, the median list price of homes in Boise, ID was $489.9K, trending up 32.4% year-over-year.”
It's a Sellers' Market in Idaho Real Estate
With interest rates low, those hoping to buy a home in burgeoning metropolises like Coeur d'Alene and Boise have flooded the market. Unfortunately, the supply of available houses across Idaho is too low to accommodate this surge in prospective buyers. Peter Lane Taylor elaborates in his article “These Are America’s Top Ten Hottest Housing Markets Right Now. Should Homeowners Sell High Or Stay Put?” for Forbes. Taylor notes that housing inventory in Boise, Idaho has decreased 58.1% since the beginning of the pandemic. In that time, 40.3% of homes on the market in Boise have sold over their list price.
Interruptions in global lumber, steel, and concrete supply chains due to the COVID-19 pandemic resulted in a shortage of new homes in 2020. In 2021, the struggle is ongoing. Josh O’Connell explains in his article “SOLD BEFORE IT'S BUILT: Local builders can't keep up with new home demand” for Idaho State Journal. O’Connell writes that “local builders can’t seem to construct new homes fast enough to satisfy the market.” Demand for new homes in Idaho has been driven primarily by out-of-state buyers.
Out of State Buyers Are Driving Up Demand in Idaho
Post Falls Press writer Kaye Thornbrugh explains in a recent article for KREM Coeur d’Alene. Thornbrugh writes that “out-of-state homebuyers” are particularly responsible for driving “demand in the North Idaho real estate market.” Quoting local real estate agent Kristen Johnson, Thornbrugh writes that “the majority of prospective homebuyers [in Coeur d’Alene] are from out of state... as opposed to current North Idaho residents looking to move.” Kaye Thornbrugh writes that “homes in Coeur d’Alene reportedly receive four offers on average and sell in around 13 days.”
Many of these homes are actually purchased by out-of-state buyers prepared to invest sight-unseen. This lack of available homes -- combined with historically low-interest rates and mass relocations from the West Coast -- has resulted in an incredibly hot seller's market. Given this, prospective buyers all across Idaho are searching for ways to become more competitive. Follow below for our seven tips for winning a bidding war in Idaho.How to Buy a House in a Sellers Market
#1 Line Up Financing
The best thing buyers can do in a hot seller's market is to line up their financing ahead of placing a bid on their dream home in Idaho. In his article “How to find a home to buy when inventory is low” for The Washington Post, Jon Coile explains. Coile writes that “a prequalification from a loan officer is worthless if you are competing with another buyer who has been approved through underwriting.” As such, every buyer competing in the Idaho housing market “must have a fully underwritten pre-approval for a loan to compete with other buyers and to be considered by a seller.”
Those who have been searching for a home in Idaho for a few months should check when and if their loan pre-approval expires.” Prospective buyers should talk to their “lender about current mortgage rates and keep current” to avoid being caught unaware when it is time to place a bid. Buyers might also need to adjust their loan amount if they are serious about purchasing a home in booming cities like Boise and Coeur d’Alene. Jon Coile notes that “the mortgage market is moving [so] you may need to adjust your target price point based on a given day’s rates.”
#2 Find a Seasoned Local Agent
Finding a seasoned local real estate agent is key to winning a bidding war in Idaho. Realtors and real estate agents who understand what motivates local homeowners can offer buyers a leg up. Furthermore, local agents understand local real estate laws. This means that they can inform home buyers about additional legal incentives they could offer sellers to increase their chance of placing the winning bid. Michele Lerner elaborates in the article “Competitive home buyers waive contingencies to score homes in tight market” for The Washington Post.
Quoting Colorado Re/Max customer officer Nick Bailey, Lerner writes that “‘what may feel necessary today for some buyers can potentially be damaging for them.’” Lerner writes that “buyers need hyperlocal professional help because the market is moving so fast.”
#3 Pay Cash if You Can
Cash is king in Idaho’s residential real estate market. Homeowners often prefer cash buyers because they can legally avoid the appraisal period required by most mortgage lenders. In her article “What Are the Benefits of Paying Cash for a Home?” for The Balance, Elizabeth Weintraub elaborates. Weintraub writes that “the realities of financing place obstacles between buyers.” Homeowners selling their homes “naturally want to deal with buyers who face the fewest hurdles.” As such, sellers will often opt for “all-cash purchase offers over higher-priced offers with conventional or FHA loan financing.” This is because homeowners “know a cash offer with proof of funds faces fewer stumbling blocks and is more likely to close.”
This appears to be true in Idaho’s housing market. John Sowell explains in his article “Come loaded with extra cash to win a deal for a Boise-area home” for the Idaho Statesman. Sowell writes that “cash offers are taking priority” in Treasure Valley, Idaho. Cash offers are “shutting out buyers who need a conventional mortgage” because “cash buyers can complete a deal much quicker.” With no mortgage lender requiring homeowners to meet contingencies, cash offers are much more attractive.
#4 Offer to Delay Buyer Possession
If your housing situation allows, offer to delay buyer possession when submitting your pre-approval documents and purchase bid. Elizabeth Weintraub explains why this is a good idea in her article “Tips for Negotiating in a Seller's Market” for The Balance. Weintraub writes that it is often “customary for the seller to move at closing.” However, many sellers are not quite ready to move after closing costs are paid and the title transfers. To give yourself a competitive edge in the Idaho housing market, “consider giving them a few extra days to move.” Homeowners might “look more kindly upon an offer that lets them move at their leisure.”
Conversely, if the seller is hoping for a short sale, offer terms that best reflect the homeowner’s needs and preferences. In short, look for any type of legal incentives you could use to sway the homeowner’s opinion on your bid. The Forbes article “6 Ways to Win a Bidding War” notes that “it’s always beneficial to find the seller’s motivation for selling (if you can).” Homeowners hoping for a short sale might choose a lower bid if it matches their timeline. Real estate investor Eric Bowlin tells Forbes that your bid could win “over the higher offer that comes with a six-week closing period…[if] you can close the deal in two or three weeks.”
#5 Look Outside Your Target District
Next on our list of ways to win a bidding war in Idaho is to look outside your target district when buying a house if home prices are too high or supply is too low. In her article “How To Buy A Home In A Sellers Market” for Forbes, Liz Frazier recommends prospective buyers “expand their search.” Frazier writes that “home prices are always higher in the hottest neighborhoods,” so buyers should try “going a little farther away from the most popular neighborhoods.” By doing this, those hoping to buy a house “can usually get more square footage and better amenities for less money.”
#6 Make Your Very Best Offer First
If you hope to buy a house in Idaho, make your very best offer first instead of entering a lower bid. The Trulia blog post “6 Major Mistakes Buyers Make In A Seller’s Market” explains why those hoping to buy a house should enter their best offer immediately. Trulia’s post notes that “offering lower than asking price is a reasonable strategy, especially if the house is overpriced compared with other similar homes in the area, or if it’s a buyer’s market with lots of available inventory.”
However, in the current seller’s market in Idaho, this “might not be the best tactic.” New York real estate broker David Dubin tells Trulia that “‘in a seller’s market, many buyers do not step up with a strong enough offer,’” resulting in a failed bid. Dubin notes that “‘there is usually a shortage of inventory, and the competition is usually fierce [so he always encourages] e a buyer to come in with a strong opening offer.’”
#7 Consider Adding an Escalation Clause to Your Bid
If you find your dream home in Idaho and cannot imagine letting it go, consider adding an escalation clause to your bid during the home buying process. Vivian Marino explains why this can help prospective buyers in her article “How to Win a Bidding War” for The New York Times. Marino writes that “buyers can add an escalation clause, also known as an escalator, to their purchase offer” to make their offer more competitive. According to Marino, an escalation clause “allows them to increase their bid incrementally, up to a capped amount, should a higher, competing offer surface.” However, buyers should keep in mind that “not all real estate agents will accept them, preferring individual offers instead.” Buyers should check in with their buyer’s agent or broker before pursuing this type of clause.
Though escalation clauses can be helpful, buyers should be somewhat wary. Elizabeth Weintraub explains why buyers should be careful in her article “Should You Use an Escalation Clause?” for The Balance. Weintraub writes that “clauses can be helpful in situations where you anticipate multiple offers on a property.” Unfortunately, escalation clauses can also “limit the negotiating power of both homebuyers and sellers,” sometimes making an offer less attractive. Because there is “no limit to the number of counteroffers that can go back and forth,” the seller might be best served by issuing “counteroffers instead of accepting the bid with the escalation clause.”