7 Ways to Avoid a Bidding War
Buying a home in real estate hotspots like Toronto and Vancouver is not for the faint of heart. With demand outstripping supply, a desirable home listed in these cities can attract multiple interested parties, leading buyers into a situation where they try to outbid each other in a fervent effort to purchase the property.
It’s easy to see why sellers would like their property to attract multiple offers: it gives them leverage to get the highest possible selling price.
Unfortunately, if you’re the buyer, finding a house you like could lead to a stressful bidding war in a “seller’s market.” But not all hope is lost — preparation, speed and the expertise of a REALTOR® can help you close the deal.
Here are seven things you can do to keep out of the bidding war zone.
1. Define your budget from the start
Start your home buying quest on the right foot with some soulful number searching. After all, you’re about to spend hundreds of thousands — if not millions — of dollars! Understand how your mortgage payments (which are likely to take the biggest bite out of your income pie, month after month) will impact your ability to plan for other expenses such as groceries, utilities, travel, shopping, entertainment and children’s tuition fees.
You don’t necessarily need to hire an accountant to work out these numbers. Take advantage of online tools available on REALTOR.ca such as the Mortgage Calculator which can give you a good idea of the money you would need to buy your dream home. The tools will also help you understand if you are bidding within your means.
2. Getting yourself pre-approved helps
It’s not a mandatory step but now’s the time to contact your bank and get pre-approved for a mortgage.
In this step, a bank or lender will assess your credit history and financial information and indicate their willingness — subject to their final approval — to lending you the mortgage money. Pre-approval reassures sellers you are a serious buyer.
A pre-approval usually is valid for 90 to 120 days and the pre-approver typically guarantees an interest rate, even if they increase drastically while you’re still house hunting.
Keep in mind that pre-approval is a free service extended by most financial institutions. You are not obliged to take the mortgage from the organization that gave you the pre-approval and you can shop around.
3. Impress the seller with a great first offer
In real estate negotiations, first impressions matter. Making an attractive first offer can gain you the seller’s favour. This way, they may feel inclined to pick you before a multiple offer situation unfolds.
It’s prudent that you compare the asking price against the average prices of similar properties that have sold in the neighbourhood. To do this, you should work with a local REALTOR®, as they have access to sales data and other neighbourhood insight that can help you make a more informed offer.
Enlist the help of a REALTOR® who understands your needs and limitations and who can advise you on the best way to make a strong first offer.
4. Show some flexibility around their non-monetary concerns
Pricing your offer attractively is great but the seller may also have non-monetary needs that you should aim to meet. The willingness to accommodate these needs may actually be the difference between winning or losing out on the property.
A common example is flexibility around the closing date. Perhaps the seller needs a few weeks more to prepare for their own move. If these requests don’t bother you, accept them graciously.
5. Don’t burden the seller with too many conditions
Because buying a home is the largest investment you may ever make, it’s only wise that you should qualify your offer with certain terms and conditions. Typically, buyers will insert clauses related to financing and a home inspection.
The condition of financing states, in essence, that your offer to buy the property is subject to your ability to obtain satisfactory mortgage financing by a certain date.
The home inspection clause states that you will need to bring in a certified home inspector to verify the condition of the property before entering a deal.
If you’re a condo buyer, you can also qualify your offer with a home inspection clause. Condo buyers in Ontario have the added advantage of placing a condition around a status-check of the condo they are interested in. A certificate issued by the Condominium Authority of Ontario can reveal any outstanding issues associated with the unit or with the building that houses it.
However, don’t forget that too many conditions can rob your offer of its charm. Your REALTOR® can help you prepare an offer that protects your interests but is kept as clean as possible.
6. Move quickly or someone else will
In hot markets it’s not surprising to hear that great properties have sold on the same day they were listed. So, once you know you have the seller’s attention, do not lose time or else a competing buyer may might swoop in.
Keep your down payment money parked in the bank, your pre-approval ready and have a certified property inspector on standby. Then, be quick about making your decision.
7. Wait for the months when the market slows
Even in hot real estate markets there are typically busy and quiet months. In general, you will face more competition in spring and autumn.
Some sellers decide to switch off during the holidays, so you may have fewer properties to choose from, too.Jess Baria is a communications professional who has worked on promoting some of the largest international urban and infrastructure developments. He views himself as a glo... View All Contributors