Some bidding wars are reasonable, where you’re competing against 1 or 2 other buyers. But then there are the insane kind of bidding war. Where 72 buyers show up, all wanting the same house!
Here are my top 10 tips that can help you in winning that bidding war for your dream home!
- Your offer price. Let’s start with the obvious. More often than not, if you are the buyer with the highest offer price, you are likely going to get the house. If the asking price is $700,000 and the seller gets three offers - $705,000, $725,000 and $760,000 – which one do you think the seller is going to choose? While price is usually the number one motivator for a seller, there are still several other factors that can help increase your odds of getting the house.
- Have a realistic view of the market and bidding war psychology. Working with a real estate agent who makes a full time job out of understanding the current real estate market is someone you want on your side. Your real estate agent should be educating you on what homes in your preferred neighbourhood are selling for so that when you do decide to place an offer on a house listed for $499,900 you understand that it is underpriced and will likely sell closer to $530,000. Also, understanding that if there are 7 offers registered on a house, it is 99.9% likely going to sell for over the asking price. By submitting an offer under the asking price in this situation all you are doing is contributing to the pandemonium and encouraging other buyers to increase their bids. Another tip: if you are submitting an offer on a house within the first few days it is on the market, you are going to need to make your offer one the sellers will be motivated to accept - read: full asking price or very close. Otherwise, since the listing is still fresh, they will ignore your offer and hold out for a higher offer.
- Increase your deposit. The higher your deposit, the more serious the seller knows you are about purchasing their house. For example: If you’re competing to buy a $600,000 house, who do you think looks like a more motivated buyer – the buyer with a $10,000 deposit or the buyer with a $35,000 deposit. Also, bring the deposit cheque with you to the offer so that your real estate agent can show the sellers that your deposit cheque will be handed over to them as soon as they accept your offer.
- Remove or shorten your conditions. In a bidding war situation, many buyers will submit a firm offer, meaning their offer has no conditions. The house is sold firm as soon as the seller accepts the offer. The For Sale sign can be flipped to Sold that night. Sellers like firm offers because there is no chance that the buyer can back out of the deal once it has been accepted on offer night. If at all possible, try and do your home inspection prior to submitting your offer so that you don’t need to include a home inspection condition in your offer. Regarding your financing condition, you need to have a conversation with your mortgage professional ahead of time to know whether you need to include a financing condition or not. If you must include a condition(s), consider shortening the condition length from the standard 5 business days to 2 business days to try and show the seller you are motivated and will act quickly to remove your conditions.
- Match the seller’s preferred closing date. If the seller has said their preferred closing date is July 31, it would be a good idea to submit an offer with July 31 as the closing date. If you have to put a date different from July 31, realize that this could be the reason you lose out on the house. If you are really serious about getting the house, it would be worth considering what you can do to accommodate the seller’s preferred closing date. Consider staying with relatives in the meantime, or bridge financing.
- Make it personal. Writing a personal letter to the seller explaining who you are and why you love their house can go a long way. Sometimes it can help you win a bidding war even when you are not the highest bidder – true story! Happened to my clients a few months ago. The sellers were so taken by the personal letter my clients had submitted with their offer that they chose their offer as the winning bid, even though it was several thousand dollars lower than the highest bidder.
- Choose a real estate agent with good people skills. Your real estate agent is going to be chatting with the seller’s real estate agent, and potentially the seller too. So it’s likely a good idea to make sure that whoever you hire as your real estate agent is professional, friendly and polite when dealing with the people that have the power to decide whether you get the house or not. If your offer is identical in price with another competing offer, your agent being a jerk could be the reason you lose the house.
- Have your agent present your offer in person. If possible, it’s almost always better to have your offer presented in person to the seller and the seller’s agent. Your offer can be discussed in person, and any questions about your offer can be addressed right away.
- Be nearby during the offer presentation. If your real estate agent is presenting your offer in person, being nearby during that time is beneficial. That way if the seller wants to make any changes to your offer, you can be close by to sign off on those changes. The seller is not going to like the idea of having to wait several hours to find out whether you agree to the changes or not.
- Sometimes you win by losing. A lot of bidding wars are won by some yahoo who is willing to pay significantly more for the house than any logical person would be willing to pay for it. For example, the house is listed at $675,000. It is likely worth closer to $735,000 so you offer $740,000. The winning buyer pays $785,000. In that scenario, I’d say you won because you had enough common sense to not pay $50,000 above what most people would consider the value to be. When entering a bidding war situation, I try to encourage my clients to think about what their tipping point number is - the most they are comfortable paying for the house, with no regrets. And if it requires even $1,000 more than that number, they are comfortable walking away and knowing it wasn't meant to be their house. It can be challenging to decide on a tipping point number, especially when the emotions of a bidding war situation are running high. But I think it's essential to have this number in mind, so that you don't wake up the next morning kicking yourself, or worse, wondering "what the heck did I do?!"
Check out my other tips for home buyers here - Blog Posts for Home Buyers
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