Multiple Offer from a Buyer Standpoint
BANG! It has happened again!
You’ve been searching and searching through this tough seller’s market, seen homes you’ve liked and said “Let’s make an offer on this one” only to find out that it just sold. Finally you see one and you get the chance to make an offer.
Diligently your Realtor®, researches the comparables and you decide on an asking price.
Now, in balanced market, your agent would register the offer, there would some negotiations and ideally a fair price would be agreed upon and everyone would move happily on.
Unfortunately, we are not in a balanced market, we are in a seller’s market. Often what happens next is your Realtor®, registers the offer and you soon get a call – “Another offer’s been registered” (or in some cases 2 or 3 more offers). I think the first thing that I usually hear after this is “You’ve got to be kidding me!” After a couple of times of this happening , frustration mounts, language gets worse and well, who do you blame – your Realtor®, because they are supposed to steer you through these pitfalls.
Many questions arise from these frantic calls and not just in the buyer’s mind.
- Is there really other offers?
- How many offers?
- Is the listing agent presenting a buyer (goes to the question of commission deals)
- But the home has been on the market for X days, and suddenly there is a multiple offer….?
Fortunately, the Real Estate Counsel of Ontario (RECO), http://www.reco.on.ca/, is taking steps to address these issues in some new legislation that will go into effect July 1, 2015 and I encourage you to ask your Realtor® about it or contact us for more information.
Moving aside from those questions we move to more personal questions. Providing that the multiple offer situation is on the up and up and, frankly a lot are, you personally will have some questions to think about. Some of them may be:
- Should I try to compete?
- What is this home worth to me?
- Will the seller ask for more from me?
- Should I remove all my conditions?
Your Realtor® cannot answer them for you. I’ve put them out there for you to think about and be prepared for as multiple offers and bidding wars are happening in many markets, not just the GTA, including our very own Georgina.
Multiple offers shouldn’t frighten you – frustrate possibly but frighten no.
If you truly feel the home is not worth the price to you, then I would suggest staying out of a multiple offer. I say this as market value is nothing more than what someone is willing to pay for a property. Even if everything comparable is saying that it may be overpriced, it might be worth that price to someone else. Many things contribute to how much a person is willing to pay for a home.
- Is it the perfect neighbourhood because a family member is down the street?
- Are they running short on time to purchase a home?
- Is there a feature that they rate very highly in the home or the property?
- Schools nearby, transportation and shopping availability
- Is this a good deal in comparison to where they currently live?
- Did they fall in love?
Also, with the market today, comparables can very quickly become out-of-date. If you are buying in neighbourhood with low turnover but highly desirable sometimes comparables mean less than the love factor.
One of the recommendations we make in multiple offer situations is to put your best foot forward. As calmly as possible discuss the maximum you would want to pay for the house, make that offer and stick with it. Be honest with yourself and examine whether you would be upset losing over a matter of $1,000 (or less sometimes), or if you were to pay anything more you would feel “ripped off”. Most times in a multiple offer, you don’t get a second chance to increase your offer. Sometimes there may be further negotiations in times of closing dates and conditions and some flexibility there may save you dollars.
This strategy might not appeal to you if some of the questions posed above apply to you. In that case you may have to bite the bullet and go big with your offer. Yes you may overpay in your mind but would it be worth it to you in the long run?
Often I have heard aggressive Realtors® suggest that you go into a deal with absolutely no conditions, do pre-inspections, have the deposit in hand, be ready to present your offer in person and give the seller everything they want. This is great advice if your client is the seller but is it taking care of you as a buyer?
Whether or not to go in without conditions needs to be a carefully considered move. It may get you the house but could also leave you in a bad financial situation which may lead to legal issues or with unforeseen expenses and repairs to the home.
The Finance Condition
The point of this condition is to ensure that the financing you need to purchase the home will be there on closing day. A pre-approval will not do this!
If you have need of financing for the purchase, many factors will go in the approval of it, one being the value of a home. Should your financial institution not value the home as much as you did, you may be responsible for making up the difference. Do you have an additional $10,000, $20,000 or more to hand over on closing? If you don’t and the deal falls through, there could be legal ramifications.
Pre-inspections? How often do we have the luxury of that in our market - Not very. With the seller’s market we are in currently, often decisions to buy are based on one showing as the homes are not on the market very long. So unless you are walking around with a personal home inspector in your back pocket that can do an inspection within an hour (which would lead me to question their qualifications) and extra cash to pay for multiple inspections, this is just not practical.
Are you an experienced handyman, work in construction etc? Are you are comfortable with the condition of the home? Is it an “As-is” purchase and you already know that you will be doing more than painting?
Or are you a first time buyer that has never had any experience with home maintenance and potential issues. If so, you may get more than you bargain for if it isn’t inspected by a qualified home inspector.
Sale of Your Current Home
Should I buy first, then sell or sell first then buy? This is a biggy and will involve so many factors that I will leave that for another day. The only thing I will say is that if you are in a multiple offer, it is a tough condition to get past unless you are well above any other bids and have a very marketable home.
These are just a few of the major conditions and how important they are to you and your purchase is a decision only you can make and it may change from offer to offer depending on the home you are purchasing.