It's no secret the last two years have been difficult, to say the least. But no one could have ever predicted the real estate records that were about to set even despite the pandemic putting us all in quarantine and lockdown. Not only did these records hit Canada's largest real estate markets like Toronto, but also spread to the suburbs where, what was once an affordable place to buy a home, soon became a numbers game. This has left many first-time buyers or those looking to move outside the big cities disappointed that they weren't able to land their dream home because of full-blown bidding wars.
No one actually wants to deal with a bidding war. They can be stressful and often make homebuyers spend more money than they ever intended. Real estate expert Odeen Eccleston shared some tips for you when it comes to winning a bidding war on a home you really want, without going over budget.
Understand your home's market value
Your broker can help you determine your market value for your home by checking comparable homes and seeing if they are selling (or have sold) for a much higher price. If so, then you are probably going to have some stiff competition. Understanding. the market value can also save you time, for example, if comparable properties nearby were sold at prices beyond your budget, you can move on and find something else.
Get pre-approved for a mortgage
Even if you have no intention of getting involved in a bidding war, it may be unavoidable. It is better to just come prepared and one of the best ways to do that is getting pre-approved for a mortgage.
A pre-approved mortgage is a great way to determine how much you can afford. Knowing your ceiling allows you to strategize with your broker if it comes down. to a bidding war situation. Plus, sellers want assurance that they are dealing with people who have the means to buy their property, so a pre-approved mortgage allows you to demonstrate your seriousness and capacity to buy. And if you end up as the winning bidder, a pre-approval speeds up the final mortgage approval process.
Prepare a sizeable deposit
In Toronto, it's common for buyers to submit deposit checks to the listing agent's brokerage 24 hours after the acceptance of their bids. Instead of waiting, you can show a seller how serious you are by having a certified cheque or money order ready, along with your offer. At the very least, you should prepare five percent, but considering the competition is strong in this area, you may want to bump that up—the higher it is, the more impressive it looks to a seller.
Get personal
It's not unusual for sellers to feel emotionally attached to their homes. Even though they are selling the property, a lot of sellers want to know that the people moving in will take good care of their old homes. If you and the seller could somehow connect and relate to each other, you might end up as the last bidder standing. Try to find some common ground with the seller, with the help of your realtor. For example, write a letter to the seller to let them know who you are and why you want to buy the house.
How to protect yourself when waiving conditions
The demand for Canadian real estate continues to be high—so what else can you do in a seller's market? You can try going all-in by waiving conditions, also known as a clean offer. This is not always recommended by realtors, but it's a tactic used by some to give themselves an edge. Taking an aggressive stance and submitting a clean offer is one step towards winning the bidding war. Not all buyers are willing to do that—and for good reason. If you need to go back on the deal, you can, but that leaves you exposed to possible legal liabilities.
By taking this approach, and coming prepared with a pre-approved mortgage, you may be able to win the bidding war. Before considering a big on a property, review the pre-listing home inspection report. Suppose you feel comfortable that the information provided is detailed enough—no structural flaws or damages that require extensive and expensive repairs. In that case, a clean offer is certainly worth trying. If the report provided by the seller lacks details that you deem necessary, what can you do? As long as there is enough time, you can try arranging for a home inspection yourself. Sure, you might have to pay out of pocket, but that is the price you may have to pay for peace of mind.
