Whether the house is uniquely valuable to you. A modest house listed at a reasonable price may be a bargain if you have three kids, the house is in an excellent school district, and the lot is large enough to add on a few rooms. The same house may be overpriced, however, for a couple not planning to have children. Don't get so carried away with judging objective market considerations that you forget your personal needs.

Strategies for Beating Multiple Offers

If demand for homes is so high in your area that you feel like you're elbow to elbow with other eager home buyers, with home prices rising by the minute, it's crucial to develop a bidding strategy.

For example, you might bid on several houses at once. Legally, this isn't a problem as long as you don't find yourself with two offers outstanding simultaneously and neither hedged with significant contingencies. If you have two offers accepted at once, you'll need to formally revoke the one you don't want.

Another option is to prepare several bids at different prices. If you're lucky, you'll know beforehand how many people will be bidding on a particular house. If so, prepare your bid accordingly. Present the lowest bid if you're the only one making an offer, the next highest if there are only one or two other people making an offer, and your highest price if there are three or more bidders.

Think twice before you get caught in a bidding war. If you decide that a house is so attractively priced that you want to try to preempt other bidders by making the highest offer, it's crucial that you set a limit for yourself -- for example, $50,000 over the asking price and not a penny more.

You might also write a cover letter to accompany your offer, telling the seller about yourself, your desire and ability to take good care of the house and garden, and your interest in being flexible in order to make the deal go through. Remember that price alone is not the only consideration for sellers.

Adding Contingencies to Your Offer