Real Estate Bidding Wars and How to Win!
If you are trying to buy a home in a Seller’s market you are not alone. With very few properties you could find yourself facing a bidding war on the home of your dreams. If you want to make a winning bid you will need to put yourself in the Seller’s shoes. Determining what the Seller wants from your offer is a start. Making that offer more attractive than the others is a good thing. Follow the 7 steps below to make yourself a strong contender in a housing bidding war.
Find an agent who you can trust. Usually a referral from a friend is enough…. But just like the Seller you should interview at least two agents to find the best fit for you. Do they have experience dealing with multiple offers and can you trust their judgement. Ask a lot of questions when interviewing an agent. Do they know the current market conditions and are they familiar with the neighbourhood? Did they explain the process and the possible outcomes? Did they come up with a strategy for winning in multiple offers? Once you find the right realtor then listen to their advice.
2. Put as much money down as you can afford.
Most buyers do not have enough money to buy a home in cash, so financing is required. That will be next BUT do put down as much money as you can afford to with your offer. A larger deposit is a strong showing of your good faith and your intention to close on the home. You will need to have liquid funds when you put in an Agreement of Purchase & Sale as the deposit money is due within 24 hours of the offer being accepted. If you buy with a condition and you do not fulfill that condition your deposit is returned to you in full. Sometimes this can take a few days or a couple of weeks as your cheque has to clear through the brokerage first. It is best to purchase a draft for your deposit money as it clears through your bank right away.
3. Get a mortgage pre-approval in writing
Don’t wait until after you have made an offer to start the mortgage approval process and don’t be afraid to shop around. You do need a good credit rating so if you know you have issue look for advice from your lender as to how to resolve these issues and improve your credit rating. Your mortgage pre-approval gives you an idea of what your future mortgage will look like based on your current financial situation. Give your realtor a copy of your mortgage pre-approval so when they put in an offer on a home they can tell the listing agent that they have a copy of your mortgage pre-appoval letter.
4. Reduce or eliminate contingencies
Contingencies are conditions in your offer like a home inspection, mortgage approval and more that you and your realtor see fit to include. Many homes although holding off on offers will let an agent do a pre home inspection on the home with their Buyers. Yes you will be paying for a home inspection not knowing if you will get the home or not. But if you get the home you will have peace of mind knowing all the minor or major issues that home has. If you are comfortable with they knowledge of the home that you have you may want to forgo the home inspection to make your offer more appealing to the Seller. I recommend you do a home inspection once you have taken possession of the home if you don’t have an opportunity to it when competing for the home. It’s your home to-do list for future. Knowledge is power and you will know how to care for your home. Some mortgage lenders with a copy of the MLS listing can get you approved for that home within the period of time that the home is holding off on offers. This way you will know that the bank approves that particular home and will give you X dollars to closing on the home. Just because you are mortgage pre-approved does not mean that the bank will approve the home at the price you paid for it. If the bank does an appraisal prior to closing you may have to come up with a larger deposit or secondary financing. This is complex and needs to be discussed in detail by your lender and your realtor so you know at all times where you stand. Sorry I’m rambling…..but want to give you as much info as possible.
5. Considering an Escalation Clause?
I don’t recommend them as many agents do not understand them so this could put your offer in jeopardy. Always put in a clean and simple offer that protects you and gives as much as you can to satisfy what the Seller is looking for with as little compromising as possible to get what you want.
6. Be flexible with a Closing Date.
If you can meet the Sellers recommended closing date that can be gold. This often helps make your offer stand out against someone else’s.
7. Don’t give up on home ownership if your offer is not chosen.
Listen to the advice your realtor gives you. They are on your side. Only pay what you can comfortably afford for a home. Follow the market and get your realtor to tell you how much other homes in the neighbourhood have sold for so that you have an idea how much homes are usually selling for. It should be mentioned that not all homes sell for over asking price in a Sellers market.
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