I'm sure by now you have read an article or two (or 17) about how competitive the current real estate market is for buyers. Bidding wars, 10+ offers on a home, bully offers, firm offers with no conditions, buyers offering to give away their first born child if the sellers accept their offer. I made that last one up, but I am sure some parents have thought about it.
Meet the buyers who are getting homes these days:
- They treat house hunting like a full time job, and a competitive sport. They are not afraid to tell their boss that they are in the midst of trying to find a home, and they may need to leave work early to see a house that meets their criteria, knowing it may sell with a bully offer within a few hours. And you will find that we talk "strategy" a lot - the right price to offer, what we think the house will sell for, determining how many offers we think the house will get, whether this house would be worth trying to bully offer on, etc.
- They are not afraid of bidding wars. No buyer loves being in a bidding war. But multiple offers are the reality in this market, and have been for several years. The sooner buyers accept that they will be in a bidding war and start arming themselves with the strategies to win, the better for them. Denial and "boycotting bidding wars" will not get you a house unfortunately.
- They are not fooled by the asking price. Most asking prices in this market are artificially low. If a house is listed for $699,900 in a high demand area, it is safe to say that it will very likely sell into the $700,000s and a sold price in the $800,000s wouldn't be shocking in some neighbourhoods. I can help you understand what homes are worth your time to go and see, and what homes will sell above what you are comfortable spending.
- They are prepared to do a home inspection prior to placing an offer. When you are competing against multiple buyers for a house, sellers expect to receive offers with no conditions. Spending the money to do a home inspection prior to submitting an offer will help increase your odds of the seller considering your offer, because there would be no home inspection condition.
- They have an intimate understanding of their finances and so does their mortgage professional. These buyers have run the numbers, know the range they are comfortable spending, and have had the detailed conversation with their mortgage professional to find out what the maximum price they can offer is without needing to include a financing condition.
- Their initial "house wish list" has gone through some revisions. You start the house hunt with plans for living in your dream neighbourhood, with a finished basement, room to park two cars, and a newly renovated kitchen. Not to worry, it's normal to have a lengthy wish list. But the successful buyers know that they may have to make adjustments as time goes on, and they know that by doing so, they open their housing options up more.
- They lower/revise their expectations. Right now it is just you, your spouse, and your little baby. Do you really need to get the four bedroom detached forever home for $900,000? Especially when $900,000 is really pushing your max budget. Maybe a 3 bedroom semi for $750,000 is a better fit right now. It would allow you to stick well below the maximum you were approved to spend, and you would have more purchasing power than the majority of the other buyers competing for the $750,000 priced homes.
- They know that they should have the deposit cheque with their offer, always. Sellers want to know that you are serious about purchasing their home, and having a deposit cheque submitted with your offer is a good way to do that. Having immediate access to approximately 5% of the purchase price is a must, to ensure you can withdrawal the deposit funds on short notice to submit with your offer.
- They are not afraid to submit a bully offer. A pre-emptive offer, or a bully offer, is an offer submitted prior to the seller's designated date that was set to review offers. Bully offers are almost always firm offers (no conditions), with the deposit cheque submitted with the offer, and an offer price that is enough to tempt the seller to accept instead of waiting to see what they get on offer night. Buyers who submit bully offers have to be prepared to act very quickly, to ensure the process is swift and efficient, and hopefully have their offer accepted before other buyers throw their hat in the ring too.
- They lick their wounds and move on. Odds are you may lose out on a dream home or two before you secure the one that was ultimately picked by the real estate Gods to be yours. The serious buyers don't dwell (too long) on the houses they didn't get. They get right back out there and keep seeing more homes. Keep your head up!
It is definitely a tricky time to be a home buyer in the Greater Toronto Area. However despite what the media may have you believe, it is possible to land a great home. And while the process can be frustrating at times, I would like to think most buyers will say it wasn't as bad as they thought it would be. Besides, just think of all the stories from the trenches you can share with your friends at the next dinner party!
Looking to buy your first home? Check out this 8 step guide to buying your first home.