From the WSJ (Hat tip ChiFi):
• When it comes to price, be realistic. Two years ago, when sales were still slow, buyers could sometimes get away with lowball offers. Now that things have heated up, make sure your initial bid isn’t insulting.
• At the same time, pick your “walkaway number”—and stick with it.
Don’t get carried away by a frenzied bidding war, experts say. Heated back-and-forth offers can be exciting and competitive, and agents warn that it is easy to get carried away. What might start as just a few thousand dollars to top another offer could end up costing far more if buyers lose their head. Pick a number at the beginning of your search that is the absolute maximum and don’t stray from it.
• Be flexible on other offer terms. While price may be what matters most to a seller, being flexible on other selling conditions can set your offer apart. Let the sellers know if you are open to discussing closing dates and moving arrangements, or offering “rent back” to sellers who want to stay in their house beyond closing in order to finish out their children’s school year or until they have bought another property.
• Once you know you want to buy, don’t dawdle. After losing four other bidding wars, Meredith Bolton moved as quickly as she could on a two-bedroom house in Waltham, Mass. She and her husband saw the house the morning after it hit the market and within an hour, they made an offer of $400,000, which was $10,000 over the asking price.
• Get prequalified. If you are getting a mortgage, be sure to get prequalified by a bank. If mortgage rates continue to rise, you will need to get reapproved, says Mr. Lamacchia, the real-estate agent, because sellers will want to know that the rate increase hasn’t pushed you out of their price range.
• Decide what you will do if the home appraisal is below the asking price. A deal can fall apart if the property appraisal comes in below the agreed-upon price. When that happens, buyers will have to put down more cash to save the deal. This is a big reason why sellers prefer all-cash offers, as well as those where the buyer can make a large down payment.
• Position yourself as a backup in case another buyer pulls out. In this market, it isn’t unusual for sales to fall through because of low appraisals, difficult buyers or for other reasons. If you really like a property, have your agent communicate your interest even after another bid has been accepted, says Mr. Dickinson. If the buyers pull out, you could be the first in line to get the house.
• Connect with the sellers. Consider another boom-era tactic: writing a letter introducing yourself to the seller and making a personal appeal, says Carrie Georgitsis, a real-estate agent on Chicago’s North Side.