Last Monday, I presented an offer on behalf of a young couple making their first offer on a property in the Danforth Village area in Toronto. They were excited about the prospect of moving in. The house was ideal in so many ways for them. But it was ideal for 7 other couples too! I once worked with some clients who made 8 offers all in bidding wars before they finally got their first home. They didn’t always heed my advice, so it took some time!
The spring market in Toronto has been difficult to fathom. Apparently there is a recession but bidding wars are happening everywhere and not just in Toronto. Colleagues in Mississauga and Oakville tell me about similar events there too. Record low interest rates would be the likely culprit.
So what do you need to do to ensure that your offer stands out from the rest and that your offer is accepted?
5 Key Elements to Winning a Bidding War
Conditions in your offer
Typically a buyer would always have conditions in a offer – such as a condition for a satisfactory home inspection. Once an offer was accepted by a seller, then the buyer would proceed to have the property inspected. Assuming a satisfactory home inspection, then the transaction firms up and the deal is done.
In a competing situation, any conditions in an offer should be removed including a condition for financing as well. This could be problematic if the seller has not provided a pre-list home inspection of the property at the time the home was listed. Imagine in the scenario above, 8 competing offers. In theory, there could be 8 separate home inspections all taking place on a Monday afternoon if are offers are to be reviewed that night. Crazy to be sure, but I have been in a home where several home inspections were going on at the same time.
- get your home inspection completed before the offer if one has not been provided
- speak to your mortgage consultant and explain the situation. There could be consequences when over-bidding in a multiple offer situation. That’s a different blog post altogether
Closing Date
Ideally, your closing date should be the one that is desired by the sellers if at all possible. Often the listing says 60 or 90 days. Which is it? I would always contact the sellers’ agent and ask if there is a specific date preferred.
Deposit Cheque
A deposit cheque is given to the sellers broker and is held in trust by them until the closing date of the transaction. A deposit is given to show your intention to close the deal. In a bidding war a bigger deposit cheque is always better! Remember that the deposit is part of your down payment and your lawyer will sort all that out on closing. And secondly, try to bring a certified cheque or a bank draft with the offer.
- Make sure you bring a certified cheque or bank draft
- Larger deposits help make your offer more appealing
If you’re a first time buyer and your down payment is tied up in a RRSP account, getting access to the money quickly is a challenge. So to first time buyers, see if you can get the money withdrawn sooner rather than later!
How much do I pay?
This is always the most challenging aspect of any bidding war. How much over the asking price should you pay? This is challenging because suddenly any comparable listings I use as a reference have no bearing.
It is important to know how many competing offers there are and the sellers’ agent by-law has to provide you with that information. And if at all possible, it would be good to know who the other agents are. This is not required but my own Brokerage – REMAX Hallmark - has set a policy so that everyone knows who is involved in any bidding war.
Some agents suggest that for every offer that is in play- add $10,000 to the purchase price. In the situation above where there were 8 offers, that means $80,000 over the asking on a home listed at $379,900! That would be nuts! Every situation is different and there are no hard and fast rules to deal with this aspect of a bidding war. Experience matters
So in a bidding war, you need to know:
- how many other offers are in play
- and who are the other agents involved.
Intangibles
Most homes in Toronto are sold with the appliances and light fixtures included in the purchase price. Sometimes not! In a bidding war situation, if the seller wants to keep a dining room chandelier for instance, then you’re best off to make sure that this chattel excluded.
Sometimes, sellers are selling before they have bought and therefore don’t know their next address and don’t know when they will be moving. In this case, I would add a clause allowing for the closing date to be moved if necessary.
Some of these intangibles can only be determined if I stay in constant contact with the sellers’ agent as they would have some insight into what would make the sellers happy thus making your offer the one that stands out from the crowd!
Good luck and call me if you need help with your offer – be it in a bidding war or otherwise.
Sam Soukas 416-462-1888
