Buying A Home In A Seller's Market: The Basics To Writing The Best Real Estate Offer to Win A Bi
Buying A Home In A Seller's Market.
Bidding wars, multiple offers and bully offers are a common occurance in the current Toronto real estate landscape. This is particularly true for the low rise housing sector in the urban centre based on recent market statistics, where demand is high and inventory is low. It's not unusual for a property to sell within the first week. If you are an active buyer with a budget of under $1million, chances are there are multiple home buyers looking to purchase the same home in your price bracket. It is important to understand how to handle a multiple offer situation, come prepared and write a winning offer in a bidding war.
Writing a winning offer does not always come down to price. The Seller will assess the best offer by looking at all the elements contained in the purchase agreement. Here are a few tips on preparing and writing a winning offer in a multiple offer situation:
Learn about how much homes are selling for in your target neighbourhood[s]
Finding a home can take anywhere from a few weeks to months. Narrowing down your search zone and price range can help laser focus your search when the right house comes up. In a fast moving market, you may not want to wait too long as the rising value of properties can result in lesser quality for the same budget. Doing as much research as possible in advance of an offer will give you the confidence to write a winning offer with the lowest risk.
Get pre-approved and understand your financing options.
Know your upper limit and how much the listed property is worth. It's not uncommon to see underlisted properties in a hot seller's market to attract maximum interest. The fair market value of the house may be well above the asking price, and fall outside of your budget. Work with an experienced real estate agent to assess the value of the listed property to ensure the numbers align with how much you want to spend.
Do your due diligence before submitting an offer to reduce risk.
You should work with an experienced buyer agent to ensure the home meets your objectives. Do a home inspection or bring a knowledgable contractor to walk through the property if the seller is not providing a pre-sale home inspection report. Sit down with your real estate agent to study the most recent comparables of solds to understand the fair market value of the listed property compared to homes in similar condition.
Offer your best price. You may not have a second chance.
No one mutliple offer process is the same. The seller may accept the best offer, or he/she may request the top bidders to make improvements on their offer upon review.
Offer a larger deposit.
The typical deposit when making an offer on a house in Toronto is around 5% of the purchase price. However, this number can vary. Some bidders may choose to offer a deposit over 5% in a multiple offer situation as proof that they have a higher amount of earnest money and less borrowing. I have seen as much as 10% deposit. This amount is technically part of the purchaser's downpayment for the property. Any deposit less than 5% can be a concern for the Seller.
Be flexible on the closing date.
If the seller has requested for a specific completion date, try and accomodate that closing date. Chances are the Seller has already purchased another home and wishes to align the closing dates of the old and new home.
Keep contigencies at a minimum.
An offer with little or no demands is more attractive for the seller than a conditional offer that drags out for days. Do as much due diligence as possible ahead of time. In a balanced market, buyers have the liberty to include a financing and home inspection clause. However, in most mutliple offer situations, buyers will have to be prepared to present a firm offer with no conditions. Discuss with your agent to understand the risk of a firm offer and decide where you can compromise.
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