Multiple-offer scenarios are a fact of life in hot real estate markets like Vancouver and Toronto. If you are a ﬁrst-time homebuyer, it’s worth preparing a bidding war battle plan to improve your odds of getting the home you want – without pushing past your affordability threshold.
Here are five strategies to keep you on track and on budget.
STRATEGY No. 1:
Don’t fall in love with any home (until you own it)!
Avoid thinking in terms of dream homes and “The One” home that’s perfect for you. Most Canadians stay in their first two homes for about 7 to 10 years, so keep your mind open as you survey potential homes in your target neighbourhood or neighbourhoods, with the features you’ve prioritized, within your budget. Bidding as if your happiness depends on that one perfect house is the surest way to end up with a property you cannot afford – and that’s not a winning approach. Remember: A debt-to-income ratio (mortgage payments, property tax, utilities and other debts compared with income) of 30 per cent or less is ideal.
STRATEGY No. 2:
Have your ﬁnancing in place
Strengthen your position with mortgage pre-approval. Having your financing lined up shows that you’re serious about buying, and assures sellers that you’re qualified, organized and won’t waste their time.
Hammer the point home with a generous deposit in the form of a certified cheque. Don’t worry: you’ll get it back if you don’t get the house, and if you do get the house, that amount becomes part of your down payment.
STRATEGY No. 3:
Cut the contingencies
A firm offer to purchase will always be preferable to conditional offers. Think about it: if you were in the homeowner’s shoes, would you rather sell to the bidder who’s ready to seal the deal, or the one who needs more time to do the homework they should have done already, such as line up their financing?
Less clear cut is the issue of home inspection. Making your offer conditional on a clean home inspection may make it a bit less competitive than one that waives this condition. That said, buying without a home inspection could lead to pricey surprises down the road. Your real estate pro can be helpful in determining the right course of action on a house by house basis.
STRATEGY No. 4:
Be Mr. Nice Guy (or Ms. Nice Gal)
It can pay off big-time in a bidding war. You may beat a higher offer simply by being flexible in light of the seller’s conditions. Consider the following:
- Do they want to close quickly so they can move into their new home?
- Do they seek a later close date so they can buy a new house?
- Will you accept the house as is, rather than require the seller to fix the sagging back fence?
Boost the competitiveness of your offer by saying yes to the seller’s conditions. It pays off in more ways than just good karma! (Want to sweeten your deal even more? Offer to pay the seller’s closing costs, such as the lawyer’s fee and mortgage discharge fee, which can run from $700 to $2,100 – not including the REALTOR®’s commission, of course.)
STRATEGY No. 5:
Be ready for a rebound
Don’t be discouraged if you get edged out by another buyer. Keep searching for other homes, but have your REALTOR® check in with the seller’s agent to indicate your continued interest in the home – just in case the winning offer falls through. By keeping in touch, you’ll have an edge if the seller finds themselves scrambling to close a sale, rather than having to start again from scratch. In real estate, as in life, persistency pays off!