Bidding wars have become a fact of life in today’s heated housing market. When a house goes up for sale the listing almost always includes a specific date when the sellers will be accepting offers. The only variable is whether or not the house is listed for an intentionally low price to try to entice even more offers (a common practice in Vancouver and Toronto real estate markets). This is great for sellers, but for would-be buyers, “losing” out on multiple bidding wars can be disheartening. Here are some tips to help buyers stand out in a sellers’ market.
Before making any offer on a house you need to know both how much you’re able to pay for a house and how much you’re willing to pay for this one. Well in advance of making any offer, you should speak with your mortgage broker or lender to find out precisely what mortgage amount you qualify for.
With intentionally low-balled listings it’s hard to know exactly how much you should offer, but a good agent should be able to gauge the expected sale price based on other recent sales of similar houses. Based on that, you’ll need to decide whether you want to try to outbid everyone else with your initial offer, or leave some wiggle room to raise the offer if it comes to that.
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But sellers are looking at more than just the final price buyers’ offer. In hot markets, any offers that come with “conditions” are likely to be pushed out of the bidding. Typical conditions include the right to conduct a home inspection or confirm financing with the bank after the offer is accepted. If you’ve confirmed that you’re qualified for a significant-enough mortgage in advance you can waive the financing clause.
In some cases the seller with have a pre-sale home inspection report available for buyers to view. If not and you’re really interested in making an offer but have some concerns over the state of the building you can ask the owners if you can conduct an inspection prior to the offer date. Over the course of buying the three houses my wife and I have lived in we’ve spent close to $2,000 on inspections for homes that we did not end up owning.
If the inspection doesn’t find any major red flags you can confidently make your offer. If it does raise some concerns, you’ll want your offer to reflect that or ensure you’ll have funds available to address the issues if you do end up buying the property.
Being flexible on the closing date can also help. If the seller is looking for a closing date that’s earlier than the closing date on your existing home, you’ll want to talk to your lender to confirm you’d qualify for a “bridge loan” – mortgage financing that covers the gap between the two dates.
Cash Up Front
Finally, you can also help sweeten your offer by including a hefty deposit cheque with your offer to show that you’re serious. The small fee you’ll pay for a certified cheque is a drop in the bucket compared to all the other costs of buying a home.
Case in point: When my wife and I bought our west end Toronto home about six years ago we were, not surprisingly, one of a few different people to bid on the home. We ended up getting the house but, somewhat surprisingly, we found out later that our offer wasn’t the highest bid. Why did the owner take our offer over the others? We had no conditions attached to our offer and attached a deposit cheque to the offer document. The owner, a widowed retiree, was going to be moving to Vancouver to live with his daughter and just wanted the whole thing over with.
Make a Personal Connection
Whenever Alex Kupiec, a sales rep with Zoocasa Realty Inc., visits a home with his clients, he looks for ways to link the buyers and sellers. In one recent case, that meant telling the seller about his clients’ connections to the neighbourhood. “I told their story, how they grew up on Oakville, had both gone to [nearby] Appleby College – they’d even been married there – and were pregnant with their first child,” says Kupiec. “You’re looking for a connection that can put you over the edge.”
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Unfortunately, the seller – who was also the listing agent – ended up accepting another “significantly” higher offer. However, the offer fell through when the winning bidder got cold feet and decided to not deliver their deposit cheque. (Some sellers won’t consider an offer that doesn’t include a deposit cheque with it for that very reason.) The seller contacted Kupiec and asked if his clients would be willing to raise their initial offer, but they decided to stand firm. Rather than putting the house back on the market, the seller accepted their offer anyway. “He wanted to make sure it was the right fit. He told me, ‘I think this was meant to be,’” says Kupiec.
In another recent case, Kupiec was visiting a house with clients when one of them noticed paintings on the wall of Spirit Lake, Alta. His clients had spent a significant amount of time there and he was able to parlay that into a talking point with the sellers.
You never know what that bond can be. Before taking possession of our current home we visited a few times to take measurements and plan for some renovations. On one occasion the owner’s daughter told us that part of the reason her father accepted our offer was the fact we were going to raise our young family in the home as he’d done himself decades earlier.
As an agent, Kupiec always insists on making the offer presentation in person rather than faxing or emailing it in. “To sit if front of someone has a different feel than looking at a printout or a screen,” he says. It also gives him one last opportunity to try to strength any connection his clients have with the seller.