Ben Sage, Moving Woodstock
Who really “wins” in a bidding war?
With the Toronto market basically on fire, and decent performance in our local market in Woodstock, its time to discuss “bidding wars”
First, I’d like to talk about terminology:
I hear a lot of my cohorts in the Real Estate business use sports / competitive terminology to describe the process of offering on a home in a multiple offer situation. I often hear colleagues say things like “we lost our second bidding war in the past week” or “my buyers won in a bidding war!” It reminds me of how emotional the home buying process is for our clients. I am not a huge fan of inserting even more emotion into the situation by using motivational terms like WIN or LOSE…. I question whether being a “Winner” in a bidding war has a long term effect on the happiness of our clients. Sure, they “got” the house they “had to have” however, it is likely they paid too much for the home, and also likely that they went in without conditions that SHOULD have probably been in the offer to protect the buyer. Hopefully none of those decisions come back to haunt the Buyer, but the likelihood is that they will.
So you’ve just found out the house you LOVE is going into multiple offers…. What to do….
Well, if you’re a rational thinker, and not tempted by your emotions, in some cases you have the option of walking away. In some white-hot markets like Toronto, you may have to wait for the market to soften in order to buy a home. Don’t worry, it may seem like forever, but it will happen at some point.
If you’re absolutely smitten, and/or you HAVE to buy the home, here’s what you need to do:
1. Remove as many conditions as you are comfortable removing. Make sure you have a solid preapproved for your financing, and that you are comfortable with the conditions on the pre-approval. For example, that you have all of your letters of employment, paycheck stubs, and have paid off your consumer debts. I would never recommend not getting a home inspection, but if you’re confident that you know the product in question, or you’re a handy person, eliminating the home inspection clause can be the clincher for a multiple offer situation. You can also get a home inspection done BEFORE you make an offer, with the seller’s approval. Minimize or eliminate as many of the other conditions as possible from your offer.
2. Put your deposit on steroids. The deposit is the only protection that a seller has if you decide to walk from the deal. Make it as large as you can afford, if you are serious about buying the house.
3. Get your agent to go fishing. Is closing date important to the sellers? Are you flexible on close? That can be HUGE for a seller. Do they LOVE their pistachio green electric stove? Better not ask for it to be included. Do they have white doily lace curtains that you’ll just rip down anyway? Leave them off the offer. What I’m getting at here, is that a properly trained negotiator (Your BUYER AGENT) can call the listing agent and go fishing for clues that might aide your negotiations. A solid listing agent won’t divulge any motivations, but we all know that no two Realtors are created equal… It’s worth a try.
4. Know your comparables. Your BUYER AGENT can provide you with recently sold comparable homes, and interpret the information contained herein. Coupled with market trend information, he/she can advise you on an accurate market value estimate, and what offer price should be fair, given your conditions.
5. Put your best foot forward. Although as mentioned earlier, I dislike the “win/lose” terminology associated with multiple offers, it’s best to have given it your best shot and “lost” than to hold back and regret it. Don’t be silly though, like that guy who paid $421,800 over asking price. Fairly certain there will be some regret in that situation, should the need to sell arise in, oh, say, the next decade.
6. HAVE FUN. Most consumers only buy a home once every 3.5 – 5 years. If you happen to find yourself buying during a feeding frenzy, take it all in. After all, its the kind of thing they make TV shows out of!
I have been successful helping clients buy, sell, or lease residential, commercial, or investment properties in the Woodstock, Ontario area since August of 2007. With technical experience ... Read More...