By Ilan Joseph, Broker, ABR®, e-PRO®, AMP® | © All rights reserved
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When buyers bid on a home with their hearts instead of their minds, all bets are off!
Do you know a First-time buyers who was on the losing end of a bidding war? Chances are, you or someone you know has been – it’s an unavoidable reality seen in many highly active markets low on inventory. Bidding wars across the city in the low-rise market (detached, semi-detached and town homes) have sent many first-time and veteran buyers walking away with their hearts crushed, empty handed.
For first-time buyers and seasons pro’s alike, losing a bidding war is often chalked up to unrealistic expectations and a lack of experience.
When you have multiple buyers all competing for the same home, emotions tend to take over. Emotions are usually not all that rational and when buyers are pitted against one another in a bid-vs-bid style showdown, prices go through the roof.
Naturally, first-time buyers don’t know what to expect when bidding on a home for the first time, especially when that first time comes in a bidding war. Many buyers simply won’t fully appreciate the value of having been pre-approved until they find themselves at the negotiating table. This holds true for having a pre-inspection done prior to the offer presentation date.
Eliminating as many obstacles as possible between you and the seller will help ensure you’re setting yourself up to be a leading contender in a bidding war, if of course your nerves can withstand the anxiety and your pockets are deep enough.
Here are some tips that will help any buyer heading into a bidding war find themselves in the winners circle:
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Walk away
Yes, turn around and don’t look back. Bidding wars tend to drive prices above market value which means that even if you do win over the home, you likely overpaid for it.
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Know your stuff
You must really understand the neighbourhood and general market conditions you’re bidding in. By knowing what comparable homes on the street and in the neighbourhood are worth, you’ll feel a lot more comfortable moving forward with your offer knowing you’re not unreasonably overpaying for the home.
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Get pre-approved
Sitting down with a mortgage specialist prior to your home search to figure out your budget is always a great idea and one I suggest to all my buyer clients. Having been pre-approved can give you the confidence to move ahead with your bid and even allow you to keep out any condition for financing which other buyers may be including in their offers. Conditions are obstacles and potential land-mines in any transaction and not having to insert a financing condition will put you in the top spot.
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Do a pre-inspection
Unless the home you’re looking to buy is only a couple years old, it’s always prudent to conduct a home inspection to see what you’re really getting yourself into. Home inspections are usually done after the purchase of a home, but in a multiple offer where any condition a buyer inserts can automatically eliminate them from being considered, having a pre-inspection done prior to the offer date will arm you with the confidence and peace of mind you want.
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Bring your deposit
Nothing yells, “I’m serious about buying your home right now” like having the money to prove it. By bringing in the deposit in the form of a bank draft or certified cheque, you’re essentially telling the seller that you’re more serious than the other buyers who have likely overlooked this highly effective bargaining tool. By bringing a deposit to the offer presentation, the seller doesn’t have to wonder if the winning bidder will bring in their cheque within the required 24 hour period. As the saying goes, “A bird in the hand is worth two in the bush”.
If you have any questions about bidding wars or would like some information about the Toronto, Vaughan or Thornhill real estate markets, feel free to contact me.
Ilan Joseph is a Real Estate Broker with Sutton Group and is co-founder of a 10-person award-winning Toronto, Thornhill and Vaughan real estate team.
You can find him on LinkedIn, Twitter, YouTube and Google+.
Since 2002, Ilan has provided valued advice and service to more than 1700 buyers and sellers, enabling them to reach their real estate goals. He’s kind of like the Bruce Willis of real estate.