The first step when it comes to winning the dreaded bidding war is to know the type of home you want and which neighborhood you want to live in, so many buyers are frustrated with how the Toronto real estate market has been over the last while and after numerous attempts and losing out they wind up getting more frustrated with the whole process and settle for the wrong house in the wrong neighborhood, that house will never be a home for these families. Having buyer’s remorse the day after is not fun. So always pre define your criteria and stick to it, never settle!
Now that is out of the way and we all understand the two most simple rules of winning, we can talk about the other stuff like; how to negotiate and how much money to offer the seller. You know all the fun stuff.
A good way to start is to work with a Professional Toronto Realtor who knows the true property values in the subject neighborhood, keep in mind that most sellers deliberately price their home well below market value to create higher demand, the trick in winning a bidding war is staying within budget and paying for the home close to current market value without over paying by a large margin. Working with a great mortgage broker is essential throughout this chaotic time; a mortgage broker brings value to the table by educating buyers on the different types of mortgage products available to them. The biggest mistake people make when buying a home is not working with the right professionals, not understanding the mortgage product that you purchase could cost you thousands in penalties down the road. You owe to yourself as a consumer to educate yourself by retaining the right people to work on your team. I can't stress that enough, it's not a sales pitch.
The next step happens well before the offer date, once it's decided that you will be offering on the home and hopefully this decision is made sooner rather than later as you will need time to conduct a home inspection. I also advise to never except a pre inspection report unless the inspection was conducted within a week of the property being listed and it was conducted by a reputable inspection firm. Carson Dunlop would be my choice as they have engineers conduct the inspection.
This next step is very important; if you’re doing business with a Realtor that does not practice what I'm about to tell you than I would suggest you terminate your relationship immediately. NEVER FAX AN OFFER WHEN COMPETING IN A MULTIPLE OFFER SITUATION! Always attend with your Realtor in person at the offer presentation; it's vital to attend as this will stop any funny business that could happen from the seller or the sellers Realtor. You want to confirm that other Realtors are present and that you have been the truth about how many other buyers your competing against. In the event that you cannot attend I person for whatever reason than do this; insert a clause stating that if the seller does not receive another offer, you will have the option to either cancel or revise yours. You can also include a requirement that if the seller accepts your offer, they will provide the name of the competing real estate brokerage that submitted the other offer. Buyers should consult their own real estate buyer agent or lawyer in preparing this clause to ensure complete protection. I also suggest using these clauses if you do attend in person, protecting the consumer is crucial. That's my belief as a Toronto real estate agent.
The deposit is also somewhat important even though it's not needed legally to bind the contract as most Realtors believe, the sum of (2) Two dollars is the amount needed to bind a contract. But most sellers insist on a strong deposit, even though the cheque is not made payable to them. 5% of the offered price and having a bank draft helps as it will solidify that your serious solid buyer.
Another great approach is to promote yourself and your family, your Realtor should paint a great picture of you during the offer presentation as sellers do care who will be living in their home.
Ok here the one that everyone is waiting for; how much do we offer if we want to be successful. Well that s a tough question and there is no formula that will guarantee that you will be successful with your bid. But I do have a rule that helps, offer anywhere between 6-8% more of the asking price for every competing offer. So of the home is listed at 500k and there is 5 offers including your own the home will more than likely sell for close to 550k, that's the magic number and you will have to be close to it to have a shot. (Please note that this applies in the downtown Toronto Real estate marketplace and at the time this article was written.)
In the event that a buyer is adamant about the closing date and it does not affect your bottom line than I would suggest giving in to the sellers demand as this will help in solidifying your offer, some buyers will close early and allow the seller to love in the home up to a month without paying rent do that they can find there next home. I don't promote this strategy as it could lead to the opening of a Pandora box after words.
And finally here comes another important piece of the puzzle, always register your offer last and as late as possible, this will help in knowing how many offers your competing with or if any at all, never register your offer early in the day.
This guide is to be used when buying homes or even Toronto condos.
Bidding wars are emotional and stressful. But being properly prepared gives you the best chance of succeeding. I will leave you with bit of advice; know your limit and do not budge from it. Do not get carried away. It is better to walk away and try again on another property than to overpay.
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