Are bidding wars back?

Q: Are bidding wars back?

A: In many places, yes.

Recent data from real estate broker Redfin shows that three out of every five homes being sold in the 50 largest metro areas are fetching multiple offers.

As a result, one out of every six of those homes is changing hands for more than the original asking price.

The median difference between the list and ultimate selling price was just under 3 percent.

What's created this sellers' market in residential real estate?

A big part of the problem is the limited supply of homes now on the market.

Millions of homeowners refinanced into super-cheap mortgages during the recession and have a big financial incentive to stay put.

Then there are all of those "underwater" homeowners who still owe more than their homes are worth and would have a very hard time selling, even if they want to.

The decline in distress sales — foreclosures and short sales — isn't helping, either

As a result, the National Association of Realtors says it would take well under five months to move every current listing at current sales rates.

Six months' worth of inventory is considered to be a healthy, balanced market.

Q: How can I tip the competition for a home in my favor?

A: In the hottest markets, houses are selling before the "For Sale" signs even go up.

You want a real estate agent who's so well-connected that he or she can get you into promising properties that haven't even been listed yet.

Scour the online listings so that you know exactly what's on the market and how much those properties cost.

You've got to know a deal when you see one and be ready to submit a bid within hours of a house tour.

Then consider these three options when you make an offer.

• Sellers often ask for refundable deposits with an offer — typically 1 percent of the purchase price. To show that you're really serious about buying their home, give them more than that. (If you get the house, this so-called "earnest money" will go toward your down payment and closing costs.)

• If you know you'll have to beat out other potential buyers, try to preempt a bidding war by making an initial offer that's slightly higher than the asking price. As little as $1,000 more than list price can seal the deal.

• And finally, make it personal. Some sellers are won over by personal letters about why you want their home.