How to win a bidding war
How can you win a bidding war in Toronto’s competitive real estate market?
Let’s face it. For buyers, getting into a bidding war can be brutal…except for one lucky winner. In today’s heated market, homes in sought-after neighbourhoods can command multiple offers and the sold price often well exceeds the asking price.
One lucky home buyer wins but the others are left in their wake without a home, scratching their heads wondering, “What happened”?
Imagine the scene from “Say Anything” where John Cusack is putting it all out on the line for Diane blasting “In Your Eyes” on his boom box. That’s what buyers are doing. They’ve fallen in love, they can’t let it go and they have to give their all to win the apple of their eye.
So imagine the feeling if Diane closed the window and said, “Thanks but I’ve decided to date Bob who brought a bigger, louder boom box instead.”?!?
We’ll walk you through the strategy of multiple offers, the step by step process and how you give yourself the best chancing of winning while keeping yourself protected.
It all begins…
You’ve been looking at homes and have finally fallen in love. Anyone who tells you not to get emotional and attached might not have bought a home before. Isn’t that how you’re supposed to feel about your future home and largest investment?
You decide to put in an offer. How do you play it? How do you win? And without paying too much?
Unfortunately, there are no guarantees. But there are a few things you can do to give yourself the best shot possible.
Always have your financing approved and ready to go. An offer with a financing condition is one of the weakest approaches. Make sure you leave time on the day of the offer to get a certified cheque from your bank for a decent size deposit – approximately 5% of the value (which of course you get back if your offer is not accepted).
Make the Offer Clean
If at all possible, do not include any conditions in the offer. However, if there are conditions that you need to protect yourself then you need to work within your comfort level.
Get a home inspection done prior to the offer if the owner has not done so already. It may seem like wasted money if you don’t get the house. But you certainly don’t want it to be the actual reason you didn’t get it. And you definitely don’t want to end up with any surprises.
Even if the home seller does a home inspection, have a detailed review – don’t assume that because they say there were no problems there aren’t. For less than the cost of a home inspection you can pay to have the inspector review the report directly with you with the permission of the seller. Still suspicious? Do your own prior to offer night if possible.
If there are any questions about the property that you need to know beforehand, you should also do your research first instead of making your offer conditional on the ability to expand the house or add parking etc.
Give the Owners what they Want
If possible, give the home owners exactly what they want. Often the most important element after price can be the close date. If it’s a matter of staying at the in-laws for a couple of weeks to get the house, you may decide this is a price worth paying Then again, maybe not!
Don’t get petty. If they want to take the chandelier, don’t ask for it back in your offer. It’s amazing how many deals worth hundreds of thousands of dollars have gone south because both parties couldn’t get over a $200 fixture.
Name Your Price
This is the hardest part. A friend once described it as being like a poker game. You don’t know what everyone else has and you have to make your bet blind.
Wait until the end to put in your offer. Why? A couple of reasons. You want to see how many offers are in – typically the more that are submitted the higher it’s going to go. You also don’t want to inflate the price other bidders after you are putting in.
Determine what you are willing to pay for the house. So many people get caught up in the thought that they are paying a large sum over the asking price. The asking price is usually artificially low anyway so you cannot use that as a benchmark.
Pay attention to the recent sale price of comparable homes in the area. If you had never seen the asking price, what would you be willing to pay? Your agent needs to do a comparative market analysis prior to offer night and know exactly what’s sold right up until that day to provide an accurate value assessment.
Next, determine how far you are willing to go to get the home. Some people are comfortable with upping their bid by another ten thousand dollars just to get the house. Think how you would feel if you lost it by just a few thousand.
Whatever the number is, at the end of the day you have to feel comfortable with your bid to the point that if you didn’t get the house, you are ok with it because you would not have paid more. Or if you win, you will never grumble about paying too much.
Some people simply lose patience with the whole process, especially if they’ve been down that road before and lost. They’ll find a home they want and will do what’s called “bullying” an offer. They will try to put in an offer before the offer date.
This will only work if the offer is substantial and worth it for the home seller to jeapoardize the multiple offer process. If they agree to view your offer, legally they still have to offer anyone who has viewed the home the opportunity to submit and offer.
But this strategy can win as it may rush other buyers to the point where they will back out and there simply isn’t the opportunity to show it more people. Your offer should have a very short irreovoable time on it. Just enough to be reasonable but not long enough to let the competition get their act together to put in a competing bid.
After all of this, even if you win you may never know what the other bids were. It is confidential information. How crazy is that?
If you are going to play this game as a seller or a buyer, make every decision without regret and do not look back. It really does work out in the end.
Just make sure you get the research you need to make the best decisions possible on price and bidding and of course, trust your realtor to guide you though every step.
Who do you know who is ready to buy or sell? If you or anyone you know is ready to take the first step, share our blog with them or give me a call. firstname.lastname@example.org