When you’ve found that perfect house you’d like to call home, the last thing you want is to have to compete with other interested buyers. But in hot markets where demand overrides supply, this is the new reality. Many homes are listed below market value to attract a large group of bidders and to create a multiple offer situation. In this situation, you should be looking at comparable sales information to determine market value, rather than the listed price.
Here are some tips to help you win the battle:
1. Work with an experienced Realtor. A Realtor with bidding war experience can help you come out on top. In choosing a Realtor, ask what success he or she has had in bidding war situations. You want a Realtor that can negotiate for you and help you formulate the bid they feel will be successful.
2. When it comes to houses you are serious about bidding on, ask your Realtor to research what the fair market value is based on recent sales comparisons for that area.
3. Shop within your means. If your purchase limit is $200,000, you shouldn’t be looking at properties that are listed at $200,000 – rather, you should be looking at properties that are asking less, but have a fair market value of $200,000 to allow for a winning bid.
4. Get pre-approved for a mortgage loan. This way you will know the maximum financing available to you. By pre-qualifying for your mortgage loan, you’ll not only be aware of your offer’s ultimate ceiling, but you’ll shop around and bid accordingly. A pre-approval means that the lender has approved your credit, verified your down payment and employment, and you only require CMHC or Genworth insurance approval of the value of the property. The Accredited Mortgage Professionals at VERICO One Link can provide you with a pre-approval certificate (subject only to appraisal or CMHC approval). If you provide your Realtor with a copy of this certificate to present to the vendor, this can strengthen your offer.
5. Have funds available to make a healthy deposit! If you can certify the deposit cheque this will carry more weight with your offer to purchase. If your bid is successful the deposit funds will “flow through” to your down payment and becomes part of the deal, but a certified cheque for your deposit speaks highly of your seriousness to purchase and follow through with the sale.
6. Play as clean as possible. Don’t add unusual requests, terms or conditions to your offer. Although we recommend that you make your offer subject to financing, if you are pre-approved you can clear this condition usually within a couple of days. Placing a condition of a home inspection can mess up a relatively clean offer – rather we recommend that you set aside a fund for pre-buy home inspections, which generally cost approximately $400. If you are interested in the appliances (and they are not listed as chattels going with the sale), you can express your interest to your Realtor to approach the vendors to purchase them after the fact.
7. Bid in uneven numbers. Don’t bid $230,000 on a house whose asking price is $230,000 when you’re in a bidding war. If your budget permits, bid something like $231,200. It may seem as though bidding an odd number would make little difference, but not only will your bid stand our from the rest, it may beat an offer that came in at a slightly lower figure (say $251,000) and give you an edge.
8. Revisit the home you plan to bid on. Maybe even a couple of times. This makes you appear more serious and gives you an opportunity to make an impression on the vendors and their Realtor. Often, if you are able to meet the homeowner and make a good impression, they may look more favorably upon you than that of another bidder and give your bid preference if terms and conditions are close.
9. Try to meet the vendor’s closing dates – this could be an important trigger.
10. Have your Realtor try to determine how many offers they are expecting. Bidding wars can seem a lot like gambling, but if your Realtor has established fair market value, maybe you can make a bid slightly higher than the fair market value assessment and beat out the opposing bidders. This is when an experienced realtor earns his money – he is working to get you an accepted offer to purchase at a fair price.
11. Be cautious of the “pretty” properties that show triple “A” because of great furniture and decorating and other attributes that are not permanent to the property. Many of the factors that cause a bidding war to escalate are attached to properties who show well and need very little work done to them. Everybody wants these properties and chances are it will be overbid in terms of price. Remember that furniture and possibly appliances will likely be removed once the vendors move out. A home that only needs cosmetic improvements (paint, etc.) but doesn’t show quite as nice may be an opportunity for a less crowded bidding war and a sale price closer to fair market value. Another thought is to investigate a “purchase plus improvements” that would enable you to bring a less than perfect property up in market value.
Before you engage in battle, arm yourself with a pre-approved mortgage, a little research, financial strategies, market value awareness and a great Realtor. With the right tools and team, you could land on top of the bidding war and be in the home of your dreams.
To get pre-approved to purchase, fill in an online application form today!
