So you see yourself getting into a bidding war do you?
In Toronto (and the GTA) we’re currently seeing a large demand for real estate, especially condos in the $350,000 to $600,000 range. With the current lack of supply, we’re seeing properties on offer presentation night with anywhere between 2 and 30 offers! So the big question here is – how can you as a potential Buyer have the upper hand in a bidding war?
Winning a Bidding War starts from the beginning – from the moment that we sit down and discuss what you’re looking for, the preparation for the bidding wars of Toronto needs to begin. Our team will pull up market and property statistics for the area and type of home that you’re looking to buy in – this will give us a good idea as to how popular and saturated that area is. Then we need to set up some guidelines outlining a purchase time frame, and what you’re looking for (Needs vs. Wants) – this will help both you and I. The next (and largest) part of preparing to buy a home is getting pre-approved (Yay!). I work with a few vetted and close mortgage representatives that have unparalleled industry expertise and knowledge from a variety of finance backgrounds including TD, RBC and MortgageSavvy. Getting pre-approved isn’t just about knowing what you can realistically afford, it’s about having a competitive advantage when you step in against 4 other offers – when you’re pre-approved, negotiations can open up with the Sellers and they know that you’re a serious buyer.
Be Ready to Take the Opportunity
When we see something that matches our criteria and is a home you can see yourself in, there is rarely the time anymore to sleep on it. This is the reason that a gameplan is so crucial when we begin, so that when we see the right home you know right away that it’s the one that you want.
Make Your Offer Bulletproof
Okay, so you just found the perfect home – the one that you’ve been waiting for! As it turns out, 13 other people feel the same way and we’re now in a good old fashioned Bidding War. Winning a Bidding War is all about having the competitive advantage over everyone else – There are 4 main parts of the offer that need to be considered, in order to make yours one of the strongest:
2. Possession Date
3. Deposit Availability
4. Conditions and Clauses
The Seller(s) will usually look for the best offer of the bunch, focusing on the above 4 criteria as a guide. Price will always be one of the biggest factors in an offer, and it is crucial to have a professional breakdown of the area and similar properties that have recently sold in the area. It is becoming increasingly common for inexperienced agents to ‘low-ball’ the listing price of a home and hold back offers, so that it can attract more attention and have an excessive number of offers. In cases like this, it is crucial for us to pull up a list of recently Sold properties in order to see what the property is accurately worth, and what we should consider offering on the property – going forward we need to know what our price point will be, and the amount that we feel comfortable offering in a second round. Having these concrete numbers will limit an ’emotional purchase’ and help us think with our heads.
2. Deposit Availability
Another key part of a Bidding War is the deposit – Typically a Deposit must be delivered within 24 Hours of acceptance of the offer, unless otherwise agreed upon by Seller and Buyer. Recently however, Sellers prefer when on the night of the offer presentations, they can reach a firm and binding deal (I know that I would!). A firm and binding deal means that there are no conditions that need to be waived, and a final deal has been struck – one important (and often overlooked) way to make your offer stand out is to prepare and bring a Certified Cheque or Bank Draft in the amount of our proposed deposit with us to present the offer. This shows good faith by the Buyer, and offers the Sellers their opportunity to get the deal done that night.
3. Possession Date
In a Bidding War, the Sellers will have the majority of the power in deciding the date of Possession or the “Move-In date”. Depending on the reasoning behind them selling their home, the standard Possession Date can be anywhere between 30 to 120 Days from the acceptance of the offer. It is now more common to see a 30-45 day possession date, as the majority of Sellers will already have somewhere to move when they decide to sell – this has proven to pose no issue with buyers, who are usually anxious to get into their new home and celebrate (Yay again!). Before an offer presentation, the Listing Agent will likely let everyone know what the Sellers ideal Possession Date is – this is the date that we should try to accomodate, if it works for you. There may be some flexibility, but usually not much – if the Sellers have asked for a certain possession date, it will certainly be for a reason.
4. Conditions and Clauses
The conditions and clauses are the second biggest factor towards creating a strong offer after price. As previously mentioned, Sellers would (for the most part) prefer that the sale of their home be firm and binding on the night of the offer presentation – and there are a few reasons for that. Firstly, let’s start with what ‘Firm and Binding’ means – a ‘firm’ offer is one that has no conditions (Condition on Financing, Condition on Inspection, etc.) and no time-frame for the buyer to back out of the deal. From a Seller’s perspective, if there are two offers to choose from (one of which has conditions and the other does not), they will more likely than not choose the offer without conditions as this leaves less room for ‘what-ifs’ and guarantees the sure thing.
I would never recommend removing all conditions from an offer, unless the Buyer’s liability is covered from all angles. Removing the financing condition without a written pre-approval leaves you vulnerable – bank’s can sometimes back out of pre-approval’s or value the home at a lower price than what was paid. If you cannot find a mortgage by the possession date, you will be forced to forfeit your deposit and may be liable for further litigation from the Sellers. The condition for a Home Inspection is an important condition as well, but not nearly as important as the Financing clause – many Listing Agents will prepare a pre-listing inspection of the property, for the main purpose of removing the home inspection clause (which may be reasonable, as long as the inspection was done by a reputable company). Without any kind of inspection, the buyer may be in for a surprise when they move in and discover unforseen issues. In all cases, it is ultimately up to the Buyer(s) to remove and waive these conditions – no conditions and a firm offer will usually prevail in a Bidding War, however they should never be excluded without a full grasp of the gravity of what it means to remove them.
Trust Your REALTOR®
In a business like Real Estate, a Realtor is who their clients say they are. Having a strong business comes from knowing the industry, knowing the people and representing all of my clients to the best of my abilities – I know what I’m doing, and that’s why you hired me. My job is to make sure that you are well represented, and are able to make informed decisions on the purchase of your home. There may be cases that a bidding war is lost, which is fine as long as we have done all we can within our limits. When it comes to Bidding Wars, you can trust that I will get all available information on the property, the market, and the recently Sold homes in the area in order to help us craft the best possible offer that we can.