As inventory dips and demand increases in many real estate markets across the country competing or multiple offers, also known as bidding wars become common place.
A brief break down of what a bidding war is:
More then one buyer is submitting an offer on the same property at the same time.
Like in any competition may the best man win! Contrary to what most think, in a real estate multiple offer situation it’s not always money that takes the cake.
As a buyer in a bidding war there are several ways you can improve your offer to increase your chances of winning in real estate offer competitions.
- Yes. Price. Come with your best. Unlike traditional real estate negotiations in a multiple offer situation back and forth negotiations are unlikely to happen. So deciding on and going in at your top and best price is what you need to do. Of course, you do not want to over pay no matter the amount of offers you are competing against so always take the advice of your real estate agent when determining this value.
- Conditions. These seem to be the first thing to get axed in an offer to purchase when in multiple offers. Home sellers just want the transaction to be completed as quickly as possible so firm offers are ideal. As a buyer though if you are considering removing conditions such as financing or home inspection be sure you are comfortable doing so. It is advisable to discuss your options beforehand with a mortgage professional as well consider bringing a home inspector with you to showings before you offer. This way you can have an edge to satisfy these conditions prior to making the offer.
- Deposit. In Ontario a deposit is required with any agreement of purchase and sale. The amount can be as low as a dollar however not advisable in most situations particularly in a bidding war scenario. To understand the purpose of a strong deposit you have to understand how it works. The deposit is typically held in the listing brokerages trust account. Upon successful closing the amount is credited back to the buyer by way of statement of adjustments with the lawyer. However should a purchase not come to successful completion that deposit can be held and/or eventually given or used as compensation to the seller or the sellers realtor depending upon the circumstances. So a strong deposit can show good faith as a buyer, that you are very serious about your offer and fully intend to proceed due to the amount of “skin” you have in the game.
- Closing Date. Typically home sellers have a date in mind that would work best for them to close. When selling a home you tend to put plans in place for the future. Where you are going and what is happening next. So a closing date can be a very important key to a successful offer to purchase. When a real estate listing is published and a home is offered on the market an ideal closing date or time frame is listed. When drafting an offer to purchase, particularly in a competing offer situation home buyers should get as close to if not match a home sellers closing date exactly. In a lot of cases the date can mean more money for a seller or more convenience which can prove to be more valuable to them.
- Inclusions. This is something often over looked in most offers to purchase. However this is also a very important negotiation tool. Inclusions can be anything from appliances to light fixtures and in some cases furniture. Emotional attachment can happen with washers and dryers believe it or not. As well the cost of replacing these items can be quite expensive. When considering an offer on a property buyers should pay close attention to what is included in the purchase price and when offering on a property in competition try at all opportunities to only include what is offered in the listing. An offer of lesser dollar value without extra inclusions in many cases can be more attractive to a home seller then one that offered more money but asked for everything but the kitchen sink!
This is not to say if you do any or all of these things when involved in a multiple offer situation you will win. Every scenario is different. Many factors can play a role and as a home buyer in a sellers market where bidding wars are common, you should always trust the advice of your licensed real estate agent on what to do when competing for a home.
This tips are just offered as a guideline based on our experience in these types of scenarios.
Happy House Hunting!
Have you ever won in a multiple offer situation or bidding war? How did you do it? We would love to hear your story!
