What are Some Tips For Winning a Bidding War?
In a city like Toronto, bidding wars are just one of the scenarios you are likely to find yourself in. As a seller, it’s an ideal situation as more competition drives up the final sale price.
As a buyer, however, the bidding war can be an emotional and frustrating process. Buyers see time pass, properties they loved sell to someone else, and reasonable (and even high) offers rejected. Our first suggestion is to work with an experienced Realtor who has a lot of market knowledge and success helping Toronto buyers.
With that in mind, here are 6 Tips for Winning a Bidding War:
- Don’t Forget About Your Budget
First and foremost, remember that after the “war” is over and the satisfaction of winning has worn off, you are going to have to pay those monthly bills. Make sure you only bid what you can actually afford. Also, make sure you don’t pay so much for a property that you might not make money selling later if the market takes a downturn.
**“Losing” out on a property is better in the long run than overpaying or getting in over your head financially. A good Realtor will help you stick to what you can actually afford, and not pay more than a property is worth. Don’t let yourself get TOO emotionally attached to a property…and be patient! Your next home is out there, it just might take more strategizing, re-adjusting of expectations, and time than it would have in a less competitive market.
When (A) you have an offer accepted on a property that’s right for you, and (B) you can comfortably afford your bills, then you have really won!
2. Go In Strong
Your first offer might be the only one the seller sees. Even if they wind up coming back to buyers after offer day to send in a second (stronger) offer, the seller’s agent will often only ask the top bidders to come back. An all cash offer is best if you can do it, but that’s not possible with every buyer. To up your odds of getting a property, have your deposit and finances in order in advance, come up with your best offer and present it at the start. A financing condition is very likely to cause an offer to be unsuccessful in a bidding war.
3. Do Your Research
You can get a good idea in advance of what a property is likely to sell for, based on recent comparables. Your Realtor can help you by looking at what comparable properties were listed for and what they actually sold for. Then you can asses how far over asking a property might sell for, how much you’d be willing to pay, and prepare a strong offer with that information in mind.
4. Rethink Those Conditions
If you’re only comfortable buying after an inspection, that is of course your call. You don’t want to make a huge financial decision if you’re not comfortable with what you’re agreeing to! As a general tip however, offers with less conditions are more likely to be accepted. The seller doesn’t want to negotiate conditions if they have other offers without them. Even if your offer is slightly higher than another but comes with more conditions, the seller may choose to accept the offer of least resistance. So lose as many conditions as you can to…
5. Make the Seller Happy
In a bidding war, the seller holds the most power. Therefore, to have your offer accepted you might have to accept some of the seller’s conditions first. If they want a longer or shorter closing period than you initially thought you wanted, you might choose to adjust your plans to agree to their timeline. Don’t get caught up negotiating about a relatively small issue like the inclusion of window treatments, or a relatively small amount of money. For example, if the seller comes back to you with a price $800 more than you were willing to pay consider how little that will impact your monthly bills. In a purchase this big you don’t want to lose out on a home over minor concessions.
6. Be Strategic
Talk to your agent about what strategies could work in your specific scenario. Sometimes a Bully Offer can work, where you present a tempting offer before the other buyers get a chance, if the offer is very strong. However, make sure you talk to your Realtor about whether that would be the right move.
Another strategy you could try is less about being financially aggressive, and more about emotions. (Wait, we told you not to get too emotional! But when it comes to appealing to the seller, keep their emotions in mind). The seller is usually attached to their property, and have many memories attached to it. So, appeal to them by writing a personal letter about why you would keep their house a home!
Do you have children you want to raise there? Is this your first home as a newlywed couple? Your story can help the seller envision you as the next owner. Many sellers are moved by these letters and the deciding factor in who they sell to (between very similar offers) can ultimately come down to something a little more personal. Buying and selling a home is personal after all!
Now that you have an idea of what to expect, hopefully you won’t get discouraged by bidding wars.
With the experience of a Realtor, some patience, and strategy you can look forward to buying your next home, even if there is completion for it.
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