While the real estate market in Toronto has cooled somewhat from where it was just a few months ago, it's still a hot one. Home prices continue to soar, and though their rate of increase isn't as sharp as it has been over the past few years, prices continue to climb and the demand for Toronto housing continues to increase.
But because there's such a demand for homes on Toronto - especially great homes in desirable neighbourhoods - bidding war are pretty common. In fact, bidding wars are pretty common in Toronto, and while that may be a great thing for sellers, it can be frustrating for buyers. Many buyers lose out on bidding wars one after the other, leaving them feeling defeated.
But there are ways to strengthen your position and improve your odds of coming out the winner in a bidding war situation.
Get Pre-Approved For a Mortgage
First things first. You're going to have to be able to afford the home you're about to buy, so you want to make sure you're not offering any more than what you can financially handle. Getting pre-approved for a mortgage will tell you what your price range is in terms of what you can afford and should be done whether or not a bidding war will ensue.
Plus, it will show sellers that you're serious about buying and that you've got the financials to make the deal happen. Sellers don't want to waste their time with buyers who may not be able to secure a mortgage, especially in a multiple offer situation.
Do yourself a favour and take the time to speak with a mortgage broker to get pre-approved for a mortgage before you start hunting for a home. Just keep in mind that your pre-approval will expire within 90 to 120 days, after which you'll need to get pre-approved again.
Further, a pre-approval is not a guarantee that you'll get final approval, as anything can happen until closing that could cause a mortgage to fall through.
Put Your Best Foot Forward
In your average real estate negotiation, buyers and sellers usually do a little back-and-forth bantering with each other. The buyer may offer a certain price, after which the seller may counter the offer with a higher price. The process can go on and on until an agreement is reached or until one party decides to bail out.
But with a bidding war, you should seriously consider offering the highest amount you were willing to pay. There's usually no time to wheel and deal with a bidding war, and instead, you may have better success with a higher offer price, as you'll be competing with other buyers.
Minimize the Number of Conditions Included in Your Offer
Real estate contracts can include any number of conditions. These conditions simply give either the buyer or seller some extra time after offer acceptance and before final closing to take care of certain issues. For instance, a home inspection will give buyers time to have the home inspected by a professional and a financing condition will give the buyer time to secure a mortgage before committing to the purchase.
And while conditions are meant to protect buyers and sellers, they can take up a lot of extra time and add an extra layer of uncertainty to a deal. When you're in the middle of a bidding war, keep your offer as "clean" as possible, meaning as few conditions as you can.
While a firm offer (one that is free of conditions) might be ideal for sellers, just be wary of the fact that you're waiving your right to have the house checked out or to make sure you can get final mortgage approval. Although most conditions may get in the way, certain ones should probably still be included to protect you.
Be Flexible With Closing
You might have a specific closing date in mind that may be convenient for your schedule, but consider what the seller is looking for. If you can find out what the seller wants before you even draft up your offer, put that closing date as part of your offer.
And if you can't find out beforehand, be open to a little flexibility if the seller comes back to you and asks for a different closing date. Flexibility can be a key factor in winning a bidding war.
Put a Hefty Deposit Upfront
While the offer price is usually the dollar figure that sellers tend to look at first, the deposit amount is also very important. The higher that number is, the more impressed and confident sellers will be with your offer.
A big deposit amount shows sellers that you have the finances to make the deal go through. And offering a big deposit is especially helpful in a bidding war situation. But not only should you talk the talk, you need to walk the walk as well. And that means being prepared with a certified check in hand that you submit right along with your offer.
A bidding war can be a daunting experience for buyers. After all, there are plenty of other buyers vying for the same home. But if you prepare yourself accordingly and team up with a seasoned agent, you can boost the odds of coming out on top.