How to put an offer on a property with multiple offers

by CRE on 22 Jul 2015
In many areas across Canada, local real estate markets continue to experience a trend toward a relative lack of home listings and an influx of active buyers. As a result, those ready to sell are in a favourable position to generate multiple offers on their home – often leading to buyers paying over market value for a property.
 
If you’re in the market to purchase a new property in an area that is experiencing this robust sellers' market, then the reality is that you may ultimately get into a bidding war with other buyers. There are certain strategies that can help position yourself and your offer above others.

1. Get pre-approved. Don’t rely on what the internet tells you or a simple pre-qualification from a lender. Take the extra step and get mortgage pre-approval. By doing this and discussing your personal financial situation in depth with your lender, you’ll have more confidence in your buying power. This is paramount if you plan to not include a finance condition in your offer.

2. Understand the sellers' needs. Buyers often make the mistake of wanting to “win” in negotiations. However, in a hot sellers' market it is the seller that has the upper hand, not the buyer. Aim for a “win-win” situation. You can partly accomplish this by understanding what contractual components are important for the seller. For instance, if the seller is looking for a specific closing date, try to give them their preferred date – or something close to it.

3. Have fewer conditions. If you’re putting an offer on a home that has generated a lot of interest, you may need to consider not including some standard conditions (financing, home inspections). Although this is not a recommended approach, it is a reality. All things being equal, a firm offer in a bidding war will typically win over a conditional offer.

4. Include a large deposit. Your ability to put a large sum of money down on a home will provide the seller with confidence in your purchasing power. This can ultimately give you an advantage over other buyers in a bidding war.

5. Make a strong offer. Every local market differs in terms of what a strong offer may look like, but each market will typically have a trend that can be analyzed. For example, a trend may dictate that for every additional offer, your offer should be increased by $5,000 to $7,000 above asking price.

Be sure to discuss these trends in your area with your realtor. Keep in mind these are only rules of thumb, so you’ll need to use your discretion based on the particular situation.

Dustin Graham is a sales representative with Re/Max and the leader of The Graham Partners team located in the west Greater Toronto Area.

Post a Comment

Most Trending News

Tips for industrial real estate investing
News

Diana Hoang, an industrial specialist, recommends that landlords seek out vacant warehouse distribution buildings that they could fill with tenants during the rezoning process for conversion.

Read More
OSFI considers setting a minimum qualifying rate of 5.25% for uninsured mortgages
News

OSFI considers setting a minimum qualifying rate of 5.25% for uninsured mortgages

Read More
Hotel retrofits could be part of COVID-19’s legacy
News

Demolitions are expensive, but it’s entirely possible to salvage a building’s structure and gut the interior. Plus, converting hotels into condos isn't entirely difficult and it's been done many times before.

Read More