How to stand out in multiple offers
More often than not, you're in a multiple offer situation. Especially here in the Waterloo and Wellington Regions (and definitely during our busy market)! But for as often as these happen, I don't think people talk about buying strategies enough, which is why that's what we are talking about today.
When you're in a multiple offer situation it's best to go in with a plan and devise a strategy for the best outcome. Usually these multiple offer situations are created by the selling side 'holding off offers.' This means the seller has chosen a day to review all offers and does not want to look at any until that date. Therefore, everyone who wants to offer on the property ends up doing so at the same time, creating a multiple offer situation and a bidding war for the property.
When this is the case, there is usually 4-7 days of the property being listed before they want to look at any offers, giving you time to view the property and complete any and all of the following to help yourself stand out and get your offer accepted!
KNOW THE MARKET VALUE:
Market value is not necessarily list price. Just because the house is listed at $500,000 does not mean it's worth $500,000. Houses can be underpriced, overpriced, or priced accurately. When holding off offers, the house is usually underpriced to drive attention to the property. This is why it's important to know what similar houses in the neighbourhood have sold for and to figure out the actual market value of the home to have a better idea of what it's really worth and what you should offer.
WHAT IS THE HOUSE WORTH TO YOU:
When looking at houses your normally have a budget in mind and know the amount you are pre-approved for and can afford to pay. However, it's also beneficial to figure out what the house is worth to you (within reason of your budget). For example, let's say the house is listed for $450,000 but you can spend up to $500,000. You need to find where in that range are you comfortable paying and what the market value of the home is, but also what the home is worth to you. It's helpful to think about it in terms of losing the house to another offer. If the home sells for $470, $475, $480, etc. will you be upset? Or happy you didn't spend that much on it?
WHAT IS YOUR COMFORT LEVEL:
A lot of times in multiple offer situations some offers received are firm - this means they have no conditions. As soon as the seller signs the offer, the house is sold then and there. The advantage to going in unconditional is that you have a better chance of it being accepted because it's less risk to the seller, and they are therefore more inclined to accept your offer. If this is something you are comfortable with, then that's great. However, if you're more risk adverse like most buyers, there is still a way to go in unconditional but still have your conditions taken care of.
Let me explain.
You can do everything prior to the set out offer day. You will need the sellers permission of course, but most are open to allowing you to complete a house inspection prior to offering. You then can offer without that condition because you've already taken care of it. Cool, right? The same thing goes for financing. You can get your mortgage lender to run the numbers before the offer day to make sure you can afford the purchase price!
Writing a letter to the homeowners explaining a bit about who you are, why you love the house, and what it would mean to you if you got it is a great way for the seller to put a face to the name and get to know who may be the next owners of their home. You'd be surprised how such a small gesture can go a long way!
PROOF OF DEPOSIT & FUNDS:
Providing a pre-approval letter with your offer never hurts. This shows the seller you are a qualified buyer and will in fact be able to purchase the home. You can also provide a photocopy of a bank draft as proof of your deposit to help make your offer look stronger. Another great tip is to offer a larger deposit than they are asking for (if feasible) as it's a sign of good faith.
These are just some of the main key factors to take into consideration when looking at houses - ESPECIALLY in a competitive market! It's always best to consult with your local realtor to give you the best advice and game plan when heading into multiple offers.
Happy house hunting!