In a market where inventory is low, and it is shifting towards a seller’s market, buyers more often find themselves competing for the same property as someone else. This can be frustrating and stressful, and seriously upsetting if you think it’s your dream home! How do you prepare yourself for this situation?
Firstly, make sure your real estate agent has explained the current market dynamics to you in your initial buyer’s consultation. It’s important you find someone who will represent your best interests and will explain the buying process to you. Educate yourself and be prepared! Before running out and start looking at homes, ensure you have a pre-approval commitment from a lender and understand the costs associated with purchasing. There are costs beyond just your down-payment (i.e. insurance, moving costs, home inspection, and condominium document review, just to name a few!). Your agent should be explaining the market conditions relative to your purchase price range and community you want to live in. Also initially, it can be helpful to drive by some homes you are interested in to get a good idea what to expect. If it is truly a fast moving market where homes are selling immediately, you should expect to write an offer fairly quickly once you found the one you can see yourself living in. It’s a shame when buyers wait too long and are disappointed when the property sells before they got a chance to write their offer.
Here are some tips and tricks to help you when you are negotiating in a competitive offer situation on your dream home:
- Get advisement from your agent on the range of market value the property should sell in. The agent should provide you with a list of recent sales that compare to the one you want to buy. They should also show you if the comparables have been increasing in sale price over the last few weeks. This will indicate whether you may have to be prepared to pay list price or higher.
- If you have the time, send a copy of the MLS® listing sheet to your mortgage broker so they can give you an idea if they support the price you want to offer (in some cases, you may be able to write an offer without a financing condition, if your mortgage broker or specialist says that is possible).
- Ask your agent to book your home inspection or condo document review in advance so you can write in a shorter condition date in your offer.
- Offer as much deposit as possible – it shows how serious you are! Some buyers are able to use their entire down-payment as their deposit. Remember, if you write a conditional offer and you are not satisfied with the condition, you will receive your deposit back. If you write a firm offer (without conditions), you will lose your deposit if you cannot complete the sale.
- Try not to ask the seller for any items that are not already included in the listing. If they did not include it, more than likely they want to keep it. If you really want it, ask your agent to call and ask if it would make or break the deal.
- Match the possession date the sellers want. Ask your agent to call before writing the offer to find out what the ideal date is.
- Choose an unusual offer price. Many buyers will pay list price or choose an even number. Sometimes simply offering a bit more, like $551,350, instead of $550,000 can make a difference and your offer will stand out.
- Ask your agent to continue to check for other offers all the way up to presentation. You may have to improve your offer depending on how many buyers are competing.
- Lastly, consider asking your agent to include a note (and maybe even a photo!) to the sellers from you. People buy people in residential real estate. Sometimes telling your story and how much you love their house can mean all the difference in getting your offer accepted.
The most important thing to remember is that negotiating is not always fair. There are winners and losers in the offer process. The sellers generally always win in multiple offers and there is only one winning buyer. Sometimes you may think you are the only buyer and find out that after you’ve been negotiating with the seller they inform you they’ve accepted another offer. As a broker/owner of a real estate company, I’ve received many a call from an upset buyer who thought they had a verbal agreement with the seller and then find out they accepted someone else’s offer! Real estate in contract law requires everything to be in writing. So if it’s not writing, and agreed upon by both parties, its not legally binding. What that means to you is don’t delay! As soon as everyone agrees, make sure the contract is signed as soon as possible by both parties – and copies are delivered before the offer time expires.
Even if the sellers choose another buyer’s offer, and it has conditions, you can ask your agent to present your offer as a backup in case that one falls through. Sometimes the buyers aren’t as prepared as they should have been and don’t get their financing approved. Or they find something they don’t like during the home inspection. You never know!
Finally, even if you are not competing, if you offer fair market value you will be in a better position to have the sellers accept your offer in a timely manner with less stress and negative emotions. Buying a property, although can have some challenges during the negotiating/condition process, should also be fun and exciting. And if you are competing, go in with a winning strategy and your “sleep at night” price. If the sellers don’t accept it, it wasn’t meant to be and in my experience, 100% of the time you will find something else you love just as much or more!
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