More and more buyers are finding out how hot the housing market in Toronto the hard way by getting involved in multiple offer scenarios. Particularly with units that are very attractive and priced to sell, multiple offer situations are not a rare occurrence in Toronto. In fact, the opposite is true: bidding wars seem like they’re just as common as typical single-offer transactions.
With bidding wars almost an imminent situation in Toronto when buying a condo, how can you make sure to stand out and end up the winning bidder? Here are 7 tips to do just that.
1. Get Pre-Approved For a Mortgage
If you’re not pre-approved for a mortgage before you submit an offer that ends up being in a bidding war, you’ll be losing the game before you even get in. Sellers are looking for many things in the offers they get, including pre-approved, qualified buyers, They are not going to want to gamble on an offer that has a financing condition over an offer that may be firm and without any conditions.
This is sound advice even if there were no other bidders on a home. It’s important to get pre-approved for a mortgage before you start pounding the pavement in search of a home so that you know what you can afford, and show the seller that you’re serious about buying and are financially qualified to do so.
2. Go Into the Offer With a Certified Cheque
The deposit that you offer is just one of the many terms of the contract that sellers will look at when determining which buyers stand out from the rest. The higher your deposit amount, the better. However, not only should you just tell the seller how much you’re willing to put towards the deposit, you should also come prepared with a certified cheque in hand.
If you do wind up the winning bidder, the seller won’t have to wait around for you to head to your bank to get the certified cheque. If it’s already in your hand at the negotiating table, your offer will look that much more attractive to the seller.
3. Keep the Offer Clean
Inserting clauses is typically recommended for buyers in order to protect them. For instance, making purchase agreements contingent on financing and home inspections are usually the more common clauses that are inserted into a contract. These provide buyers with the opportunity to ensure they’re able to get approved for a mortgage, and have a certified home inspector scope out the property to make sure there aren’t any major issues with the place, respectively. If either one of these clauses is unable to be met, the buyer can walk away from the deal and get the deposit back.
However, in a multiple offer situation, the fewer clauses, the better. A contract with no clauses is known as a ‘clean’ offer whereby the sale is considered firm as soon as both parties sign off on the purchase agreement. Proceed with caution, however, when it comes to which clauses you choose to avoid. Understand the potential consequences of foregoing clauses in an effort to put yourself ahead of the crowd.
4. Be Flexible With Closing
Whatever closing date the seller wants, give it to them, as long as it doesn’t entirely mess with your situation. The more flexible you are with the closing date, the easier it will be for sellers to look in your direction when it comes time to choose the winner. If it’s a tight closing, consider looking into a bridge mortgage to help you carry the mortgage of the new home you just bought as well as the current home you still need to sell.
5. Go in With Your Best Offer
There’s no room for going back and forth with the price in a bidding war, though sellers will typically pick their tops offers - usually two or three - which they will work with to negotiate on the best price. However, when you’re first going in on an offer, be sure to put your best foot forward and offer your highest price. When a seller obtains numerous offers, they’ll be sifting through them and likely be tossing out the lowest offers on the table. Make sure yours makes it to the final cut by putting forth your best offer right off the bat.
6. Know When to Walk Away
Make sure you enter the market with a solid idea of how much you can comfortably afford to spend. Your lender might have given you a certain amount that you’d be approved for, but that doesn’t mean you should go for the maximum. The last thing you want to do is put yourself in a position where you become “house poor” and spend almost all of your income on your home.
In a bidding war, things can get pretty heated and decisions will typically have to be made on the spot. To ensure that you don’t go over the limit that you’re comfortable with, make sure to write down the exact number that will be your absolute limit, and stick to it at all costs. If the bidding starts going over that amount, walk away.
7. Don’t Get Emotionally Attached
Buying and selling is a highly emotional game, and bidding wars just amplify that factor. It’s easy to fall in love with a home and imagine yourself living in it before you’ve even put in an offer. Having said that, it’s important to try your best to keep your emotions in check so that you don’t end up crushed if the home ends up in another buyer’s hands.
Purely from a mathematical perspective, the odds aren’t in any one particular buyer’s favour in the situation of a bidding war, and the more buyers involved, the worse the odds get. There can only be one winner, so it’s important that you are realistic about that fact and try to separate emotions from business when you’re caught up in a bidding war. Remember: there will always be another house on the market.
Bidding wars are certainly not ideal, but they are a reality in Toronto. In order to be the winning bidder on a condo that you’ve got your sights set on, be sure to keep these tips in mind and work with a reputable real estate professional who has plenty of experience handling bidding wars as well as the particular location you’re buying in.
We have many other tricks, including having great relationships with many of the listing agents in the city. If you have any questions contact us anytime at firstname.lastname@example.org
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