With a very low supply of available homes & record-low mortgage rates the competition to buy a home is fierce. Most homes across Canada are selling quickly, often seeing multiple offers or even bidding wars, and selling over asking price. We cannot guarantee you will win the next bidding war, but these tips will help set you up for success.
Having a handle on local market conditions and knowing what houses are selling for is a must. The asking price is often useless and should be looked at as an opening bid. It has nothing to do with the value of the property or what it’s going to sell for. Instead, you should focus on recent comparable sales. Sellers commonly underprice in the hopes of generating more interest and creating a multiple-offer situation—also known as a bidding war. An experienced realtor can tell you what similar properties in the area are selling for, and it’s also important for buyers to familiarize themselves with the market by viewing multiple homes to see what features their money can buy.
GET PRE-APPROVED FOR A MORTGAGE
This gives you an idea of how much a lender is willing to finance, and how much you can spend. A pre-approval also locks in the current interest rate for up to 120 days, so you can shop with the peace of mind that you’re insulated from rate hikes in the near future. If the rate drops, your lender should honour the new lower mortgage rate when you’re ready to make your purchase.
KNOW YOUR BUDGET
How much can you afford to spend on a home? This is different from a mortgage pre-approval. Take into consideration your lifestyle, and what sacrifices you’re willing to make. If you’re planning to buy more home, you might have to curb your spending elsewhere. If you won’t be making any lifestyle changes in interest of home ownership, you may have to lower your home-buying budget or make some other concessions, such as the size of the home or the neighbourhood.
Don't overbid for fear of losing out, as it can cause problems with the appraisal & the mortgage.
BE PREPARED TO ACT FAST
If you’re hoping to buy a home in a seller’s market, you’ll need to take quick and decisive action when you find a property that interests you. This is where all your prep work will pay off.
When a home comes on the market, you need to see it immediately because many won’t reach the offer date—they’ll get a pre-emptive offer. When the Seller gets a pre-emptive offer also known as a bully offer, they can choose to take the offer or wait for offer night and hope for a multiple offer situation.
MAKE A STRONG OFFER
In a seller’s market, you may only get one chance – and it’s not always about the money. When you’re up against multiple other buyers, your offer must be unconditional to be competitive. After all, why would a seller choose an offer that’s conditional on the buyer obtaining financing or on getting a home inspection done—which might put the deal in jeopardy—if there’s a selection of unconditional offers to choose from? Offer conditions aren’t ideal for the seller, as each one adds potential risk to the deal.
Good (selling) agents will have a pre-list home inspection done, so buyers can rely on something to put in an unconditional offer, but it’s up to the buyer to get their own inspection.
CONSIDER MAKING A PRE-EMPTIVE OFFER
In a seller’s market, you need to be quick and sometimes it is worth being the quickest if the sellers are allowing pre-emptive offers. A “bully” offer is one of the strategies buyers can implement in a seller’s market. Being first with an offer presents the seller with an enticing scenario, take the offer in hand or wait for offer night and hope they get an offer as good as yours—or better yet a bidding war. If you opt to submit a pre-emptive offer, it needs to be generous enough to tempt the seller.
If you’re hoping to buy a home in a seller’s market, you’ll need to be prepared to pivot. Market conditions can change on a dime, have a back-up plan in place, in case you need to change your timeline.
If you’re getting frustrated because you keep getting outbid, it may be time to review your wish list. Real estate, like many things in life, is a tradeoff, you may have to rethink your preferred home’s size, location, amenities or price.
DON’T FALL IN LOVE
If you fall in love with a particular house, it's hard to go back. You start dreaming about how great your life would be if you had all the wonderful things it offered. In a seller's market there is a lot of competition and you are likely going up against many offers. Chances are high your offer will get rejected and as you know rejection can hurt.
HAVE THICK SKIN
Don’t take rejection personally. Instead, learn from the experience and keep trying. Homebuyers who have been living in persistent seller’s markets know the pain of rejected offers and being “beat” by another buyer. Working with the right real estate agent helps buyers see new listings as soon as they hit the market, so you can jump on “the one” when you find it.
Don’t give up and be patient, the right house for you is out there.
Adapted from: blog.remax.ca