Scott McGillivray is a real estate expert and host of HGTV Canada’s Income Property and Moving the McGillivrays.
I’ve said it before and I’ll say it again – the only person who truly wins in a bidding war is the seller. Buyers who compete for a property and go over budget put themselves in a dangerous situation. But given the state of the current market, bidding wars might be here to stay, so if you get caught up in one, make sure you’re prepared. Follow my steps for coming out of a bidding war on top!
Research Ahead of Time
Before you do anything you should research the market you want to live in. Find out what homes are listed for and what they’re selling for. If homes are going for more than the asking price you know there was probably a bidding war.
Get Preapproved
One of the smartest things you can do is to get preapproved before you start looking at houses. It will help you to understand what you can afford, but more importantly, it can really help you out in a bidding war situation. If other people’s offers are conditional on financing, yours is far more likely to be accepted – even if the offer is slightly lower.
No Conditions (Except For One!)
A clean offer with no conditions is the ideal scenario in a bidding war. However, there’s one condition you should always include, and that’s a home inspection. If you “win” the bidding war and the house turns out to be a lemon, you could lose a lot more than you bargained for.
Image courtesy of Skit Inc.
Make a Large Deposit
A large deposit indicates to the seller that you’re willing to put your money where your mouth is. If you’re not sure how much to put down ask your agent to look into what a typical deposit amount is in the region (it can vary based on location). This will give you an idea of what other potential buyers might offer so that you can put down more.
Beat the traffic
Houses listed on a Monday or Tuesday typically sell for less than those listed on a Thursday or Friday. I always try to get in early in the week so I can take a good look and put in an offer before the weekend traffic hits. There’s no law that states that you can’t make an offer before the official offer date, and it really bothers me when agents hold off on offers to create a bidding war situation. Beat the traffic – beat the bidding war.
Know Your Limit
Before you put in an offer you need to know exactly how high you can afford to go. This will be based on your income, down payment amount, and monthly budget. Once you’ve determined what your limit is it’s up to you to stick to it. If a bidding war breaks out, you need to be ready to stop. Don’t offer more than you know you can afford.
Be Flexible
While you might not be able to be flexible with your budget, you can be flexible with other things. Take closing dates for example. If the seller wants a particularly short or long closing, do what you can do accommodate it. Any way you can make the seller’s life easier puts a gold star next to your name, and it can mean winning the deal over another buyer.
Take Emotion Out of It
The toughest part about a bidding war is keeping your emotions in check. For some of us our competitive side comes out and we just want to win, while others might feel emotionally attached to the dream of owning this particular home. Whatever emotion you’re experiencing, do your best to rein it in. When emotions run high, mistakes are made.
