I wish I could tell you otherwise…I really do. But I have to be honest; if you are in the market for a home in the GTA you will very likely enter into a bidding war once you are able to find the right property. I always tell potential buyers that instead of protesting and trying to avoid the inevitable they should educate and prepare themselves in order to successfully increase their chances of buying the home that’s right for them. Now, I am not saying that EVERY single house out there will receive multiple offers, but depending on where you are looking there is a good chance that you will at one point or another during your house hunting process encounter it. As many of you know I have been very active in this market and have probably been in more bidding wars than I want to remember. I will go ahead and give you simple tips to consider in order to be better prepared.
- Get pre-approved- This is ALWAYS important when buying a home, however when you are in a multiple offer scenario it can mean the difference between getting the home or losing it to another buyer. It is common in many areas for competing offers to be ‘firm’, meaning that there is no financing or home inspection condition. A firm offer is preferred by the seller since it is immediately binding and the buyer can’t back out of the deal regardless of whether or not they can secure financing for the home. I am not going to lie to you, depending on your price point and where you are looking, when you enter a bidding war going in ‘firm’ might be your only chance at getting the home. Often sellers will choose a ‘firm’ offer that is slightly lower in price than a conditional offer for a higher purchase price. So, with this is mind, it is CRUCIAL for you to go to your bank or mortgage broker and ensure that you get a full pre approval to avoid any unpleasant surprises. If you are selling your existing home and are using the equity to buy your next one, then it is also important for you to get an accurate estimate of your home could sell for in today’s market. No, it is not enough for you to know how much your neighbour Mike sold his for, pick up the phone and call a local Realtor to get a proper evaluation.
- Know the market- This is key. If you are a first time home buyer, or perhaps don’t know the market in your area of choice start doing your homework right away. It is not enough to rely on Real Estate reports from Newspaper or websites. You need to understand that every neighbourhood is different. I work in areas where it is common to offer $200,000 over the asking price, but if you go 1km south houses sell for below asking price. You should educate yourself on how much homes have recently sold for, List to Sold Ratios, average days on the market, how many offers are common on a particular property, etc. Knowing this can save you headaches, disappointments, and wasted time. For example, if you have a budget of $1 million and you see a house listed for $999,000 on Realtor.ca. you should have a good idea of whether or not that home will sell for that actual list price or much higher.
- Go strong, go all in- If this the perfect home for you, act like it. I hate to sound harsh, but I have to be honest with you. For you to win a bidding war, it means that you will have to pay more and offer more favourable conditions than the other buyers. It is that simple. Now this doesn’t mean that you should be reckless and have no consideration for what the house is actually worth! This is why I emphasized earlier that you should know the market you are buying in, you should be familiar to a good degree what similar homes in the area have sold for recently. Based on this and taking into consideration the number of offers you will be competing with you can come up with a maximum price YOU feel comfortable paying for it. Once you know that, don’t be afraid to pull the trigger if the home is right for you. My advice for buyers is always the same, when you are given the chance to improve your offer, give your best and final number. I often tell client “Offer a price that you would be okay with me calling you tomorrow and telling you it sold for a DOLLAR over your offer”. It is important not to over pay for a home especially if you are getting a mortgage since more than likely the lender will request an appraisal to confirm the value of the home. If the appraisal comes in lower then you might be forced to put a larger down payment, and in the worst case the bank might refuse to give you a mortgage for that property.
Obviously entering a bidding war can be stressful, but remember if you love the home and have done your homework and due diligence you will be fine.