How to make the best offer in today’s competitive market
stories by Janet Lees
Dealing with competing offers is a challenge that buyers in Toronto and other large markets have been grappling with for years, but it’s a new phenomenon in Southern Georgian Bay. With a greater pool of buyers for a smaller number of homes available for sale these days, it is more likely that several buyers will make an offer on the same home at the same time. It can be nerve-racking to make an offer only to find out you are in a bidding war with other buyers, but there are some strategies you can employ to make your best offer and have a better chance of winning the war.
1. Go in High!
“Many different tactics can make the difference between buying a home and missing out, but really it usually comes down to money,” says Blair Thompson of Remax Four Seasons Realty. “The highest bid usually gets the house. I would like to say there is more to it, but enough money will always win you the property.”
Gerry Wayland of Remax at Blue Realty agrees. “Offer your highest price and make it attractive, maybe a bit above list price,” he advises. “Ask your agent for a comparative market analysis to determine pricing. Sometimes sellers deliberately set a price below comparable sales in an effort to generate multiple offers, so paying a little extra doesn’t necessarily mean you are paying over market value.”
In a world where competing offers can go well over asking price, there is little room for negotiation. Low-balling is simply not an option; you need to go in strong. Winning the day means knowing your upper limit and making sure you have all the information and preparation possible to make a strong, qualified and educated offer.
2. Do Away With Conditions
“Buyers like conditions,” says Thompson. “It’s a chance for them to have a home inspection, check with their bank, sell their previous home and decide if this is the right home for them. But in a seller’s market there is no time for this.”
When you are competing with other offers, you have to assume that those other offers will be condition-free. If you want to have a chance of winning, you have to have as few conditions as possible, and preferably none. “As a buyer you have to have your funds available to make the purchase and you may want to bring a home inspector or builder with you when you view the home,” advises Thompson. “That way you can make the offer without any conditions.” An offer with no conditions is stronger and has more chance of success.
3. Get Mortgage Preapproval
Being prequalified for a mortgage is not the same as being preapproved. Prequalification means your mortgage lender has looked at your total income and debt and provided a rough idea of how much you would qualify to borrow. Preapproval takes this a step further; the mortgage lender reviews the application and agrees to provide you with the funds at a set interest rate. While neither is a guarantee of being approved for the mortgage loan, a preapproval is considered a stronger indication of access to mortgage financing.
“To stand out, ask your lender for a loan preapproval letter, which is different than a prequalified letter,” advises Wayland. “Being preapproved makes you a stronger buyer in the seller’s eyes.”
4. Tell a Story
Everybody loves a good story, and these days your story could make the difference between buying a house and missing out.
“During the offer presentation, don’t have your agent just show up with your offer; make sure they come prepared with your personal background, family details and anything else you think the sellers would want to know about you,” says Thompson. “Even though our area is growing rapidly, in many ways we are still a small town, and a family picture may win you the property.”
5. Be Flexible on Closing
Next to price, closing date is arguably the most important part of your offer but is often overlooked.
“Some sellers want a quick closing, some want a later date and some would like a specific day to coincide with their plans,” explains Thompson. “If you can find out what the seller wants in terms of closing, then your offer, which might be very similar in price to other offers, just moved into first place because of this information.”
Wayland adds it’s also a good idea to extend the buyers’ moving date to after closing. “Cut the sellers some slack by giving them two to three days to move out after closing, without expecting compensation,” he recommends.
6. Wow Them with the Deposit
In hot housing markets where competing offers are involved, a larger deposit is sometimes seen as a more attractive aspect of an offer and may be an important factor for the sellers in determining which offer they will choose to accept.
“The larger the deposit, the more serious the seller will think the buyer is,” notes Thompson. “There is no rule as to how much a deposit should be. My suggestion is to pick a dollar amount that is a hard amount to walk away from.”
7. Know How Many You’re Up Against
The Real Estate Council of Ontario (RECO) has a new rule that requires listing agents to disclose the number of written, signed offers received for a particular property.
“It’s always nice to know how many different parties are interested in the same home you are,” says Thompson. However, agents are not required to release any details regarding competing offers or identify the people who made the offers, and agents may not claim a competing offer has been received if there is no signed offer.
8. Make Time Your Friend
Offers to purchase property normally have an irrevocable date and time – the date and time before which the offer cannot be revoked by the buyer. Going in with a killer offer and setting a short irrevocable time puts pressure on the seller to accept your offer before other competing offers start pouring in.
“In a normal market it is not uncommon for this time frame to be 24 hours, but in a seller’s market you cannot afford to give the seller that much time,” says Thompson. “It always varies but sometimes you have to be very aggressive with this.”
9. Hire an Experienced Realtor
Today’s market is simply too competitive to try to “go it alone” as a buyer. You need an experienced, savvy realtor with a clear understanding of the local market to help you navigate the challenges of a potential multiple offer scenario.
“You don’t have to do everything they say, but it’s nice to have someone giving you suggestions and letting you decide the best option for you.”
10. Prepare for Bully Offers
In today’s competitive market, it is common for sellers to set a specific date for buyers to submit offers on a property. This allows the seller to go over all of the offers at one time, compare them and get a better idea of how much buyers may be willing to pay. A “bully offer” (also known as a pre-emptive offer) is an offer that is made before the offer date initially set by the seller(s) and their agent.
“Generally, but not necessarily, bully offers present a sum higher than the asking price, and are submitted by competitive buyers with a serious interest in the listed property,” explains Wayland. “While the term ‘bully’ can carry a negative connotation, bully offers are legal and, in some cases, may even be beneficial for both the buyer and seller.”
The best way of knowing whether or not to make a bully offer is to ask your realtor. “They have the experience and expertise to be able to read the situation and figure out when to time submitting your offer on a property,” says Wayland. The same advice applies to sellers, who should check with their agent before setting an offer date, and before choosing to entertain any offers that come in earlier.”
The multiple offer process is fraught with complex details and strategies. Jumping into the fray is not for the faint of heart, but it’s a reality in today’s market where competing buyers are bidding on the few homes that are available. With a lot of pre-planning and preparation, a knowledgeable realtor, a solid offer and nerves of steel, you can come away with the prize: a new home.
“My advice would be to take your time, think it through, do not succumb to the pressure, and with the help of your experienced and competent realtor, make a strong, well-thought-out and well-drafted offer,” says Thompson. ❧
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