My top tips for winning a bidding war
Monday Nov 23rd, 2020
MY TOP TIPS FOR WINNING A BIDDING WAR
Let's be honest here - the current market can be exhausting, emotional, and disheartening for buyers (and their agents). For the last few years, we've been knee-deep in a Sellers' market.
Low inventory and low-interest rates means that multiple offers have become the norm.
You finally find a home you can picture your family in - only to end up competing against 5, 10, maybe even 15 other offers. You do the math and see your chances of winning dwindle.
This is a scenario most buyers will face in their search for a home. There will be losses, there will be disappointment. Outcomes are hard to predict and the only way you are ‘guaranteed’ to win
is to over-pay. But there are things that you can do to improve your chances of nabbing that dream house.
- YOU NEVER GET A SECOND CHANCE TO MAKE A FIRST IMPRESSION
Don’t assume you’ll get a chance to improve your offer. Put your best foot forward - this means price, closing, and conditions. Your first offer is often your last, so make it a good one.
Also, don't get intimidated by the big number when deciding on just how much to offer. That extra $5,000 dollars (especially at a higher price point), amortized over 25 years, at 2.49% is
much easier to digest when you calculate it as a bottom line, "per-month" price.
- KNOW YOUR LIMIT, STAY WITHIN IT.
Having said that, always keeping in mind what you can realistically spend. The last thing you want to do is overpay for a house - your bank will want an appraisal to verify the value before they
give you a mortgage. Also, ask yourself - if the market takes a downturn, can you see yourself living in this house for five years?
- ACCOMMODATE THE SELLER
If you want to win a bidding war, you must accept that you aren’t in a position of power. If there is a specific closing date in the listing, chances are the Seller has purchased another home.
When only a range is given (60-90 days) more often than not, there will be a specific date that the Seller has in mind. The more you can accommodate the Seller, the better your chance of winning.
- HAVE YOUR (CERTIFIED) DEPOSIT CHEQUE READY
This shows the seller that you are serious and that your agent knows what they’re doing. Even a firm offer isn’t a done deal until there is a deposit in hand. From the Sellers' perspective, a “cash in hand”
offer is less of a risk than a higher offer without one.
- CONSIDER REMOVING YOUR CONDITIONS
The whole point of multiple offers, from a listing perspective, is to get the best price and a firm, quick sale. When a Seller accepts a conditional offer, they take the risk that a Buyer will not get financing, or
that a home inspection will uncover problems the Buyer isn't willing to accept. If you find yourself competing against one, maybe two other offers – a conditional offer may be reluctantly accepted, provided
that the price is enticing enough to a Seller. However, once you’re up against many other offers – a conditional offer will likely end up at the bottom of the pile.
I understand – many buyers are wary to remove conditions. In which case, consider removing just one condition, shortening the conditional period (ie: from five banking days to 48 hours), or consider having a
home inspection or appraisal done before the offer date (more on that below).
- CROSS YOUR T'S, DOT YOUR I'S - BEFORE THE OFFER
If you are concerned about the condition of the house, have an inspection done before the offer date.
Some Sellers have their own home inspection done in advance of listing their house. While this can be useful, don't relying on it – the home inspection industry is highly unregulated.
If you're concerned about the appraisal, talk to your bank ahead of time. Although unconventional, getting an appraisal done before an offer has one big advantage.
If an appraisal comes in lower than the price on offer day, you can have a contingency plan in place for any necessary funding beyond the mortgage from the bank.
A note of caution – if at first you don’t succeed and get outbid, having inspections and appraisals done multiple times can get expensive.
- BE A BULLY
Sometimes you'll see a listing with a set offer date that states “the seller reserves the right to review pre-emptive offers”. A pre-emptive offer is also known as a bully offer.
Why would you want to submit one? Simply put, to beat others to the punch - potentially getting ahead of many days’ worth of competing buyers looking at the house.
From a listing point of view, a bully offer has to be enticing enough for the Seller to pull the trigger early. When a bully offer is registered, all agents who have shown or have
appointments to show the property will be notified. More often than not, you will find yourself in a multiples anyway – just earlier and with potentially fewer competing buyers.
THESE NEXT TWO ARE MY FAVOURITE…
- INCLUDE A PERSONALIZED NOTE OR PHOTOS
I cannot even begin to tell you how many times this has sealed the deal for my clients. I've discovered many times after the fact that despite my clients' offer not being the highest,
the Sellers chose theirs because they "liked them". Sellers, especially those who’ve lived in their home for a long time, care about who will be buying “their” home. If they’ve developed relationships with
their neighbours, they will care about the buyer being the “right fit”. Putting a face, and a backstory to the name, helps the Seller form a relationship with the Buyer.
- MAKE YOUR PRICE MEMORABLE
I’m not a fan of even numbers. In a pile of offers, an offer price of $980,000 does NOT stand out. A tactic that I learned years ago is to go with an unusual number. Every time I’ve done this,
I’ve had the listing agent ask me, “Kate, why $983,643?” The point being, the offer gets noticed and remembered.