With fewer sellers and high demand for housing in the GTA, bidding wars are back as the spring market gets under way. But for buyers these auctions are stressful and fraught with dangers, not the least of which is that you may end up paying too much for a house and go on to regret it.
Here are some things that can help you come out ahead:
- Research the area to get the low down on the neighbours, schools, parks, demographics and crime rate.
- Visit with your lender or mortgage broker in advance to get a clear understanding as to what you can afford to spend in order to buy a property, without having to dramatically change your standard of living.
- Work with a professional sales person. You need to know the real market value of properties. Many sellers deliberately list their property at 5 to 25 per cent below market value to bid it up.
- Conduct a home inspection before submitting the offer, so you can make an offer without conditions. Sellers prefer this.
- Do not participate in a faxed offer process. Always insist on attending with your agent in person.
- Put in a deposit with your offer of at least 5 per cent of the price, to demonstrate you are serious. If possible, use a bank draft.
- Bid later in the day and give the seller a shorter time to deal with it. That way they will not have the time to generate offers from other buyers.
- Offer to close the deal faster.
- Market yourself and your family. Many sellers do care who will be living in their home and taking care of it after they leave. Explain how you and your family will do this.
- Be flexible. Offer to close the deal early, but perhaps let the seller stay there for a few weeks, rent free, to more easily arrange their own move.
- Know your limit and do not budge from it. Do not get carried away. It is better to walk away and try again on another property than to seriously overpay.
- In some cases, sellers indicate they will not accept any offers for two to three days. Bring your offer in early as the seller will usually want to see it anyways and this may give you an advantage.
- If you are suspicious about whether there is a competing offer, consider inserting a clause that states that if the seller does not receive another offer, you will have the option to either cancel or revise yours. You can also include a requirement that if the seller accepts your offer, they will provide the name of the competing real estate brokerage that submitted the other offer. Buyers should consult their own real estate buyer agent or lawyer in preparing this clause to ensure complete protection.
Bidding wars are emotional and stressful. By being properly prepared, you have the best chance of succeeding.
Mark Weisleder is a real estate lawyer. Contact Mark at firstname.lastname@example.org