Purchasing a new home can be an exciting time, but the often long and arduous process can take its toll on even the most patient of buyers. With bidding wars running rampant across major Canadian cities (and especially in the Toronto real estate market), it’s easy to get carried away. As such, it’s more important than ever to keep your emotions in check when putting in your offer.
My husband and I recently purchased our first home and though we’re happy with the outcome, the journey was often emotionally draining. We had heard often from friends about the psychological warfare that is the bidding process, but were taken by surprise regardless. Upon completing the process, we came out with a number of insights to help other buyers navigate bidding wars.
Related Read: The Need for Speed – Making an Offer on Toronto Real Estate
Make a Game Plan
When it comes to entering a bidding war, the last thing you want to do is ‘go with the flow.’ If you’ve just viewed a home you’d like to bid on, map out exactly how you’d like bidding to progress based on multiple scenarios. Here are a few questions to ask yourself:
- How much would you bid if there were no other bidders?
- How much would you start at if you knew it was a multiple bid scenario?
- If bidding goes into second round, what will be your next bid?
- What is the absolute highest you’d be willing to pay?
Your agent is a great resource for helping you answer these questions based on their market experience, but ultimately you decide what you are willing to pay. When we bid on the house we ultimately purchased, we adjusted our game plan once we knew we were up against only one other bidder. We had a price ceiling in mind and when it came to putting in a second bid, we made sure not to go over that ceiling even though it meant we could lose the house.
Use the Buddy System
Bringing a friend to an offer presentation is a good idea for the same reason bringing a sponsor to an AA meeting is a good idea: accountability. Even if you’re purchasing a home on your own, it’s wise to review your game plan with someone you trust and bring them along with you when you put in your bid. That person can act as a sounding board and help you stick to your plan. If you’re purchasing with another person, discuss your game plan prior to bidding and keep each other in check if one person starts wavering. I was often the emotional bidder, feeling compelled to increase our bid to win the bidding war. Working as a team meant I never went completely overboard.
Another consideration when it comes to additional support is choosing the right agent. Do your best to choose one that is levelheaded and won’t pressure you to increase your bid in order to complete the sale. We were very happy with our agent because she helped us stick to our budget and never pressured us to overbid.
Don’t Be Afraid to Walk Away
You will walk through several homes during the searching process, and you’ll fall in love with at least a few of them. When it comes time to bid, you may envision yourself sitting on the terrace of your prospective home or biking through the neighbourhood. This can be dangerous emotional territory and result in overshot bidding because you feel as though the home must be yours. In these instances, keep in mind that you might love the next house you see even more and be prepared to walk away if bidding goes way above budget.
When we bid on our current home, after two rounds of bidding we still weren’t the official owners because the seller wanted slightly more than what we had offered. We decided not to budge, knowing that we may not get the house if the seller chose not to take our offer. In the end, we got the house and managed to come in under budget – but only because we were ready to walk away.
Be Mentally Prepared
The bidding process can be stressful, and be prepared to spend several hours waiting in your car as multiple agents put in their offers. Be prepared for multiple rounds if offers come in close to one another. Be prepared for the final offer price to be six figures over asking price.
These are all aspects that surprised us, but we managed to keep our emotions in check and ultimately found a house that was just right – and within budget.