The title of this post is a little misleading, because as far as I’m concerned, there’s no such thing as “winning” a bidding war. But in markets where demand is high and supply is low, bidding wars are an unfortunate reality (at least for the buyer). So here are my best tips on how to keep a level head and get the right house without blowing your budget.
Know Your Limits
Before you consider buying any type of home it’s really important to know exactly what you can afford. You need to do a thorough assessment of all your expenses – car, entertainment, groceries, pets – you name it. Knowing how you spend your money will help determine what you can afford.
Get Your Financing in Order
Make sure to get pre-approved by your bank or mortgage company before you put in an offer so you know exactly what you can carry – and how high you can make your offer. If you get into a bidding war situation you need to know exactly where your limit is. The other advantage is that other potential buyers may want to make their offer conditional on financing. If you don’t have to do that you have a major advantage.
Do Your Research
Before putting in an offer make sure you’ve researched everything. I’m talking about the neighbourhood, schools, accessible transportation, traffic – everything. All of these things play a part in the value of your home so you want to be sure you’re still getting a good value should you have to go higher with your offer than you initially planned.
Speak to Your Real Estate Agent
Having a good agent who knows and respects your limits is very important. But it’s equally as important that you be firm with him or her about where your line is. An agent’s job is to research the comps in the neighbourhood and advise you about what they think the house is worth, and what they think it will sell for. (They can’t predict the future, but they should be able to come pretty close.) Second, it’s their job to help you get what you want for the price you’ve told them you can afford. It’s up to you to be honest with your agent about what your cap is. Make sure you and your agent have a good dialogue about all these things before you jump in head first. If your agent tries to up sell you on the price and encourage you to go beyond your budget, it’s time to find a new agent.
Make a Big Deposit
Making a big deposit on the home can show the seller you mean business. It’s best to have your agent look into what the typical deposit amount in the region is (it can vary across the country) so that you have an idea what other potential buyers may do. Then I suggest you put down as much as you can afford. It will go towards your down payment if you get the property, and you’ll get it back if you don’t firm up the offer. A clean offer with a large deposit in the form of a certified cheque could mean winning the deal over another buyer.
Sometimes winning a bidding war can be as easy as agreeing to the seller’s conditions such as closing dates, buying the property ‘as is’, or even offering to move the closing date up if it works better for the seller. If they’ve already purchased another property they might be in a hurry. Making it easy for them gives you a better shot at getting the house (even if your offer is a bit lower than the others).
When it comes to buying a house emotions can take over. It’s scary, it’s exciting, and let’s be honest, it’s thrilling! But getting caught up in the emotion of it all can lead to bad decision-making and you could get burned. Be strong and stick to your guns. If you don’t get this house another one will come along.
#ScottTip – A clean offer with no conditions can be appealing to sellers, but under no circumstances would I ever advise that you waive a home inspection. You may get the house, but not knowing what problems it has may mean you get some very costly fixes along with it.
Bottom 2 photos courtesy of iStockphoto.com