The housing market is currently very tight. In other words, there are more buyers looking for homes than there are homes for sale. This is known as a sellers’ market and quite often homes are selling with multiple offers and selling for over asking price.
What is a Bidding War?
In this type of market Realtors quite often use a holdback offer strategy when listing a property. What this means is that any interested buyers are asked to wait until a specific date to submit their offers. Typically this is between 5 to 7 days after the property is listed to present their offer.
This time frame gives buyers the opportunity to view the property and gives their Realtor time to complete the appropriate due diligence to support the buyer come up with an appropriate price to offer and also develop an offer strategy.
On offer day buyers indicate their interest to submit an offer with their real estate agent. The buyer Realtor’s will be notified of how many offers are registered but will not have any insight on how much the other offers are – this is kept a secret. Once all offers are received the sellers to review all offers. What normally happens is the seller‘s agent and buyer agents will be negotiating throughout the entire offer presentation period to get bids that are close to each other to up their offer both from a price, closing date, and condition perspective. The seller will ultimately accept the strongest offer.
How to Win a Bidding War?
Since the details of other offers are not divulged, you will not have any details on the other offers you are competing against. But there are some tips that will increase your odds of getting your offer accepted.
Tip #1 – Get Insight on Seller’s Ideal Closing Date In Advance
During bidding wars, you want to get as much insight as you can to make your offer as appealing as you possibly can to the seller. So understanding if the seller prefers a long closing date or a tight closing date will give you a bit of an advantage. Have your Realtor ask the seller Realtor what is their client’s ideal closing date.
Tip #2 – Ditch the Conditions
In a bidding war, choosing to waive the conditions such as inspection, financing, and status certificate can give you the upper hand, and quite often if there are many competing offers other buyers will use this as a key strategy to getting the home. As the offers without these conditions will be more attractive as once accepted these offers are sold firm and the uncertainty of the possibility of sale not going firm goes away.
I have seen many instances of sellers accepting lower priced offers because they did not include conditions. If you however decide to make a firm offer it is absolutely critical that you can move forward with your offer. For example, if your offer gets accepted and your mortgage financing falls through you will lose your deposit and possibly face litigation.
So make sure that you are pre-approved and do what you can with your financial institution in advance to ensure they will not have any concerns financing the property as well. With regards to the inspection – you want to ensure there aren’t any major issues so getting the home inspected in advance will give you peace of mind.
Tip #3 – Have the Deposit Ready
If you are serious about buying the home make sure you have your deposit money ready ahead of the offer date. The standard in the marketplace is a 5% deposit of purchase price. So if you need to move funds around from investments or other accounts make sure you do this in advance as doing this after your offer is accepted may result in delays.
In competitive offers having a copy or picture of your bank draft included in the offer tells the seller that you are serious about buying the home. In the event that your offer gets accepted the deposit is required by the listing brokerage in 24 hours.
Tip #4 – Submit a Strong Offer
When listing agents list a property and hold back offers, they normally price the home below market value to set up the property for multiple offers. As a result, submitting an offer in a multiple offer situation requires that you submit a strong offer. Working with a Realtor to ensure that you are butting forward a strong offer and quite often your best offer is critical, as there is no guarantee that you will get a second chance.
When you find that perfect home in a seller’s market when multiple offers are common and prices are continuously increasing it is critical to determine what the home is worth to you. Work with your Realtor to get educated on what is happening in the market and with other comparable properties that have recently sold for. It is a good idea to discuss what your maximum budget is just in case you get emotionally engaged and so that you can draw the line on the maximum that you are willing to pay for that perfect home.
It is a good idea that your first offer is not at your maximum budget and in fact, is a good idea to have a buffer as you may be asked to up your offer to get the home. Thinking about your boundaries in advance will help keep your emotions in check during the offer presentation negotiation period.
If you are ready to begin your home buying journey, reach out, and let’s start searching for that perfect property.