How To Come Out a Winner in a Bidding War
You’ve finally found a house that checks all your boxes and you’re ready to put in an offer, but your Realtor® has just informed you that there are multiple offers on the home. As if buying a house isn’t stressful enough, now you’ve got a bidding war to contend with. What happened to the good old days when the price was the price and you could expect to pay within a few thousand of what was being asked? When did the real estate bargaining table become an auction floor? We, at The Faris Team, know that this can be a stressful scenario, but that’s why we’re here.
Bidding wars have slowly been on the rise over the last few years and spiked substantially in 2016. Low housing inventory and high demand has created conditions for a perfect real estate storm. In practical terms, this means that well-presented homes in the average price range are very likely to get into a bidding war. Never fear – there is more to winning a bidding war than having deep pockets. Here are seven tips to help you come out a winner in a bidding war:
1. Enlist a Real Estate Expert
By far, the most important factor is choosing the right Realtor to represent you®. Most realtors don’t have much training in the art of negotiation, however, at The Faris Team our sales partners are also Real Estate Negotiation Expert (RENE) certified*. RENE is an additional certification offered by the National Association of Realtors aimed at elevating and sharpening negotiation skills. In a bidding war scenario, you’re looking for every advantage you can get. If you’re interviewing Realtors®, ask them if they’re RENE certified.
2. Beef up the Deposit
If you were selling your home and had to choose between two offers, which would you choose – the offer with the $25,000 deposit cheque or the offer with the $100,000 deposit? The size of the deposit has an impact. Yes, money talks. You don’t have to put a six figure deposit down, but the bigger the deposit, the more attractive your offer will be. If you don’t have the additional funds on hand, consider a deposit in two stages – 10% down now and 10% on a future date.
3. Be Flexible
If you’re ever in the enviable position of deciding between two job offers, you know how much the flexibility of your potential employer means. The same goes for offers in real estate. Do whatever you can to be as flexible as possible with the sellers. If the seller has requested a possession date, do what you can to accommodate their request. The more attractive offer is always the more flexible one. In fact, many sellers have a range in mind for a possession date as opposed to a specific day, so if you can offer a window of time, all the better. In a perfect world, two months is optimal, but a shorter period of a couple weeks may also be attractive. Flexibility is often the trump card in a winning bid.
4. Scratch the Conditions & Inclusions
Ideally, you want your offer to be the one that demands the least from the sellers. You can do this by not making the offer conditional on financing, inspection, or anything else, and at the same time not requesting inclusions in the selling price. In fact, you can bolster your bid if you make the extra effort to include proof of mortgage pre-approval or other documentation which will prove your ability to financially complete the transaction. It is important that you are certain financing will not be an issue. In addition, do a pre-home inspection before submitting your offer so you can be informed about any deficiencies to the home preventing any surprises down the road. Remember, once you scratch the above conditions, you are committing yourself to closing on the home.
Buying a house is one of the most emotional experiences you can go through, and the best way to keep a level head is to do the math. Your Realtor® will help you determine the real market value of the property you’re looking at. Next, calculate the maximum amount you can pay and, finally decide what you’re willing to bid for this particular home. When putting your offer on paper, remember to bid an odd number. You may be wondering what difference it will make whether you bid $450,000 or $451,200; your bid will stand out from the crowd and that seemingly insignificant $1,200 may just be the number that puts you out in front.
6. The X Factor – You
The price you’re offering to pay is, of course, critical, but so are you. Most homeowners have an emotional attachment to their home which is why they tend to prefer selling to buyers they have met and like. The seller is interested in getting top dollar for their house, but there’s also a psychological desire to find a “match” for their home. Remember to put your best foot forward every step of the way. When it comes time to make an offer, make sure you put your personal touch on it. Ensure that your Realtor® has your business card to give to the seller, include a family photo, or attach a brief, hand-written note about why you love their home. Your sunny disposition and winning ways with the seller may just be the X factor that gives you the edge.
7. Know When to Walk Away
Sometimes the only way to win is to walk away. As the saying goes…buy the most expensive house you can afford. If the price is outside of your budget, no matter how much you love the soaker tub, it’s the wrong house. But not to worry, we will help you find the right one.
*See FarisTeam.ca/the-team for individual Realtor® designations