Winning the war on bidding

BY JAY BRIJPAUL

As of late, there has been a significant drop in the number of homes available in the Toronto real estate market, and as a result, buyers are facing the resurgence of bidding wars. Olivia, a first-time buyer lost out on seventeen offers. For a bidding war to start, two factors must be present; the price of the property must be low, and the property must have an offer presentation date. The lower price acts as a magnet and attracts more buyers. The buyer’s fear of losing their potential home steps in and the battle begins. If buyers are not careful, they can overbid, even giving up their right to a proper inspection of the property or obtain financing. To win the war on bidding you need to take on the mindset of the seller.

When you think like the seller you have an advantage over other buyers. Eva used this technique and won. The property was vacant.  Eva offered a fair price with a quick transfer date. The offer was firm; meaning that she bought the home without any conditions such as bank approval or inspection. Most buyers will purchase a home on the condition of proper financing and inspection. Sellers tend to dislike this as it creates uncertainty. A firm offer can be fatal if the buyer is not prepared.

Luck is when preparedness meets opportunity. The first step is to know how much money you can borrow. A mortgage broker can assist with this. Give them your employment information and pay stubs and ask them to check your credit. With the bank’s blessings, you can now flex your financial muscles and buy without a financial condition.

Buying without financing is a great option but many times the buyer can over pay and the bank will only finance based on the appraised value. Joan bought a property for $500,000 with a solid down payment of $100,000. She required a mortgage of 80% or $400,000. The bank, before lending, appraised the property at $450,000. The bank loaned 80% of the appraised value, $360,000 and Joan must now increase her down payment by $40,000.  Knowing what similar properties are selling for in the area at the time of purchase would have prevented this appraisal bombshell.

Many buyers forgo their right to inspect the property. Asher bought a home in Toronto. With ten offers on the line, his realtor advised that he remove the inspection condition. After taking possession of the home, Asher discovered an old oil tank in the basement. It turned out that the oil seeped from the rusted tank and affected the neighboring property. It was an expensive lesson. When an offer presentation date is set, arrange to conduct an inspection prior to the presentation date. Knowing what you are buying is critical.

To win the war on bidding, offer the seller aspirin. Find out what the cause of their headache is and then give them the antidote. Mary, a buyer, realized that the seller, an elderly man, had lived in the same home for over 20 years. He bought a newly constructed home and feared that there might be a delay on the possession date. If his current home closes before the new one is ready, he would need to pack his belongings in storage and find other accommodations. Mary offered a flexible closing date to match his and the seller choose her offer.

The idea of winning is to beat out your competition, other buyers. Offer a sizable deposit, secure a draft and present it with the offer. If there are two similar offers, the one with the draft is more likely to win.

Accompany your realtor and meet the sellers. This personal touch is warm and vitalizing. Sometimes you win the war by leaving the battleground. Establish your “walk away” price and stick to it. When it comes to bidding wars, it is better to walk away and be a living survivor than a dead hero.