In today’s heated market, there are still a lot of sought-after neighbourhoods where homes command multiple offers and the sold price well exceeds the asking price.
One lucky home buyer is successful but many others are left in the wake still without a home, scratching their heads wondering, “What happened”?
We’ll walk you through the strategy of multiple offers, the process and how you can best prepare yourself to buy or sell in this situation.
For those of you who are unfamiliar with this approach, it’s where a home seller will accept offers within a certain time frame from potential buyers. Each buyer will put in an offer not knowing what other buyers are offering. The best offer wins.
Let’s start from the perspective of the home seller…
Using a multiple offer or ‘bidding’ approach can be a great way to sell your home fast and for great money. But it takes a lot of preparation and nerves.
First, your home must be immaculate and staged properly. This does not just mean decluttering and cleaning. Invest in a professional stager, and although it may take thousands of dollars to fix up your home, the return will be well worth it.
Potential buyers need to see that they can move in without any work needed. It also has to appeal to the widest range of buyers so take the usual staging advice into practice – perception is everything.
Get a home inspection done before you list the home. This will eliminate the ability for any buyers to use this a condition of their offer. It will also save any suprises that could make the deal go south.
Sellers will usually price below market value. This can be frustrating for buyers who get excited about a great home for such a good price. But that is the point! You want as many people to see the home as possible. The more people see it, the more offers there will be which usually translates to a higher sale price.
You should also price below the mental thresholds of people’s shopping range. If you were going to price at $460,000, get it down to $439,000 below the $450,000 mark. Buyers usually set search parameters in $50,000 increments. If you are just above their max, they won’t even see it. If you are just below you’ll make your home available to another huge group of buyers.
If you price it too close to the current market value, you may drive away potential buyers since there is an understanding that a seller doing an offer night is going to price lower than market value and people want to feel like there is a chance they can get a deal.
Many home owners are afraid they will only sell their home for the list price and are reluctant to go too low. If you don’t know what you’re doing, it could backfire. But if you understand the exact current market conditions (seasonality, supply, demand, comparables etc.) and the home is in great shape then you will be too.
You’ve been holding your breath for a week and now it’s time to tango. Offers can be accepted at your home or at the real estate office. Typically each realtor will come in and present their offer.
You can’t just look at the numbers. There are a lot of things to consider – close date, conditions, the size of deposit. Some of these things may be worth more than a few thousand bucks or a lower offer may be the more secure one.
You may select the top few offers and take a chance to ask the agents to go back to their clients and sharpen their pencils, but this can be risky…if they feel pushed they may walk away and you can be left with nothing. Tread lightly and don’t get greedy!
Now for the Buyer’s perspective…
You’ve been looking at homes and have finally fallen in love. Anyone who tells you not to get emotional and attached has never bought a home before. That’s how you’re supposed to feel about your future home and largest investment!
You decide to put in an offer. How do you play it? How do you win? And without paying too much?
Sadly, there are no guarantees. But there are a few things you can do to give yourself the best shot possible.
Always have your financing approved and ready to go. An offer with a financing condition is one of the weakest approaches. Make sure you leave time on the day of the offer to get a certified cheque from your bank for a decent size deposit (which of course you get back right away if your offer is not accepted).
These days, $20,000 plus on the average home is about right. If you have more available to you, just think about how you feel looking at a cheque in hand. The more the better.
Make the Offer Clean
If at all possible, do not include any conditions in the offer. However, if there are conditions that you need to protect yourself you need to work within your comfort level.
Get a home inspection done prior to the offer if the owner has not done so already. It may seem like wasted money if you don’t get the house. But you certainly don’t want it to be the actual reason you didn’t get it.
If there are any questions about the property that you need to know beforehand, do your research first instead of making your offer conditional on the ability to expand the house or add parking etc.
Give the Owners what they Want
If possible, give the home owners exactly what they want. Most important can be the close date. If it’s a matter of staying at the in-laws for a couple of weeks to get the house, do what you have to do!
Don’t get petty – if they want to take the chandelier, don’t ask for it back in your offer.
Name Your Price
This is the hardest part! A friend once described it as being like a poker game. You don’t know what everyone else has and you have to make your bet blind.
Wait until the end to put in your offer. Why? A couple of reasons. You want to see how many offers are in – there is a theory that the more that are submitted the higher it’s going to go. You also don’t want to inflate the price other bidders after you are putting in.
Determine what you are willing to pay for the house. So many people get caught up in the thought that they are paying $X over the asking price. The asking price is usually artificially low anyway so you cannot use that as a benchmark.
Pay attention to the recent sale price of comparable homes in the area. If you had never seen the asking price, what would you be willing to pay?
Next determine how far you are willing to go to get the home. Some people are comfortable with upping their bid by another ten thousand dollars just to get the house. Think how you would feel if you lost it by just a few thousand.
Whatever the number is, at the end of the day you have to feel comfortable with your bid to the point that if you didn’t get the house, you are ok with it because you would not have paid more. Or if you win, you will never grumble about paying too much.
Some people simply lose patience with the whole process, especially if they’ve been down that road before and lost. They’ll find a home they want and will do what’s called “bullying” an offer. They will try to put in an offer before the offer date.
This will only work if the offer is substantial and worth it for the home seller to jeapoardize the multiple offer process. If they agree to view your offer, legally they still have to offer any buyer who has viewed the home with an agent the opportunity to submit and offer.
But this strategy can win as it may rush other buyers to the point where they will back out and there simply isn’t the opportunity to show it more people. Your offer should have a very short irreovoable time on it. Just enough to be reasonable but not long enough to let the competition get their act in gear!
After all of this, even if you win you may never know what the other bids were. It is confidential information. How crazy is that?!
If you are going to play this game as a seller or a buyer, make every decision without regret and do not look back. It really does work out in the end.
Just make sure you get the research you need to make the best decisions possible on price and bidding and of course, trust your realtor to guide you though every step.
Who do you know who is ready to buy or sell? If you or anyone you know is ready to take the first step, share my blog with them or give me a call. email@example.com