Let’s face it, bidding wars suck for buyers! There’s a ton of pressure and the bidding process can get emotional. In the end there is only one lucky home buyer who walks away with the prize, while the others are left scratching their heads wondering “WTF?”
The market has been active – interest rates are still low and there are buyers on the hunt for houses. If a house is located in a really great neighbourhood, you can bet the demand will exceed the supply.
Remember that house in the Yonge and Lawrence area that was listed for $699,000, received 72 offers and sold for $1,366,000? Yes, you read correctly…$1,366,000, that’s 195% over asking! No wonder why my buyer clients cringe when I have to break the news to them that a house has an offer date.
After encountering multiple offer situations in the past week for several of my clients, I thought it was time to document a few tips and tricks to improve your chances of winning. While this blog entry is by no means the answer to winning all bidding wars, its intent is to educate you and give you the best chance at winning your dream home.
Go in With a Clean Offer
There are 2 important conditions that typically go in all offers:
- Home Inspection
Always have your financing approved ahead of time. An offer with a financing condition during a multiple offer situation is a weak approach to winning. Sellers want to firm up offers as soon as possible and if they have to wait for you to get your finances in order with your bank/mortgage broker, then of course they’ll want to go with the buyer that knows, with 100% certainty, they can afford the house.
It’s risky waiving the home inspection condition without having the home inspected. You never know the condition of the home – there may be issues with the insulation, cracks in the foundation wall, etc., that you may end up paying for down the road. If the homeowner has not done so already, your best bet is to get a home inspection done prior to the offer. If the seller did a home inspection, make sure you review the report in detail and consult with the home inspector if you have any questions. If you’re not confident about the report, get another home inspection done before submitting the offer.
In the end, you need to work within your comfort zone and if you’re uncomfortable going in with a “clean offer” then you should include conditions/clauses to protect yourself.
Be Flexible With the Possession Date and Give the Sellers What They Want
Many sellers don’t know exactly when they want to close. Giving the seller the option to set their own closing date within a timeframe determined by the buyer may appear more attractive. Try to accommodate the seller’s requested possession date and work with your realtor to determine the date the seller wants.
Come Prepared with a Certified Deposit
Most deposits are typically delivered to the listing brokerage upon acceptance of the offer. In a multiple offer situation, you’ll want to prove to the sellers that you have the money and capacity to complete the transaction – this will show you mean business and are serious about this offer!
My clients often ask me “how much deposit should I give?” While there is no written rule, a larger deposit can speak volumes. If you know that you’re going to be participating in a bidding war, make sure you give yourself ample time to shift your money around (if required).
Tell Your Story
When presenting offers to the sellers and their realtor, I like to give a little background information about my clients and explain to them why the buyers love their house. Cash isn’t always king and sometimes the emotional connection is the extra umph needed to win the bid. Don’t forget to explain to your realtor why you love the home, or better yet, write a personal note to the sellers – a little goes a long way!
Be a Bully
You heard me…BE A BULLY…and forget everything you were taught growing up about why it’s bad to be a bully! This can be a risky strategy but may pay off in the end. A bully offer is when you submit an offer before the offer date. This will only work if the offer is considerably higher than asking and worth it for the seller to risk the multiple offer process (e.g. will the seller be better off accepting your bully offer or will they get a better offer if they go through with the multiple offer process?).
Legally, they have to notify everyone who has visited the property and give them an opportunity to submit an offer. Your offer should have a short irrevocable time on it to prevent others from acting on this and putting in a competing bid.
While bidding wars can be crazy, preparing yourself and getting the right information ahead of time will help you make the best decision possible. Work with your realtor and make every decision without any regret.