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How To Win a Bidding War ?

How To Win a Bidding War ?

By

David Doe
*

Published in

Real Estate
*

05 Jan 2022


It's no secret that this year has been challenging, putting it mildly. Despite the global pandemic putting us all in quarantine and lockdown, no one could have imagined the real estate records that were going to be set. These records didn't just impact Canada's most prominent real estate markets (we're looking at you, Toronto and Vancouver), but they also expanded to the suburbs, where what was once a cheap area to buy a house quickly turned into a number-crunching city. While this helped keep the economy afloat, it also left many first-time buyers and those wishing to relocate outside of significant cities dissatisfied that they couldn't find their dream home due to full-fledged bidding wars. Due to the supply and demand issue, which means more people are looking to move than homes for sale, bidding wars are more common than ever in all of these seller's markets. Multiple offers may be made on a home for sale, and sellers want to recoup their investment !

We don't want to be involved in a bidding war in the first place. They can be stressful, and they can cause us to spend more money than we intended, which is risky and not an option for many people during COVID-19. That's why we've put together some advice on how to win a bidding war on a home you want without going over budget !

winning a bidding war 101

Winning a Bidding War 101

Here are a few things you and your real estate agent can do to help you win a bidding war and get the house you've always wanted:

  • Make a Proposed Budget and Stick To It

We understand how difficult it can be to stick to your budget during a bidding war. After all, another buyer will attempt to outbid you, so it's better to be safe than sorry when it comes to your financial situation. The bank will tell you how much house you can afford after you get a mortgage pre-approval, so while you may be mentally prepared to make a higher offer, your bank account may not be. As a result, you should also become acquainted with market conditions (or have your real estate agent explain them to you) !

Don't overpay for a property that isn't worth it. It is not easy to find the ideal home, but knowing your financial situation can help you stand out. You may have sufficient funds for a down payment or be eligible for mortgage financing. It's critical to have a team of professionals guiding you regarding funding. A mortgage broker can help someone considering budget in various ways and will find a way to collaborate with you on multiple fronts to assist you on your path to homeownership !

  • Prepare Your Pre-approval Form !

The home's seller is dealing with their own set of issues, including deciding which offer to accept. However, you can show the listing agent and the seller your mortgage pre-approval form that you received from the lender to make their decision easier. Most sellers will expect a buyer to have one, but not all will, so you can increase your chances of the seller accepting your offer by demonstrating that you've done your homework and are confident in your ability to afford the home !

  • Remove Contingency Clauses:

A contingency clause is something the buyer has agreed to, and the sale will not close until that unconditional offer is met, such as a specific move-in date or a requested inspection contingency. Waiving your contingencies shows that you support the sellers and will work with them to complete the transaction. Because sellers dislike contingencies, if there are multiple offers, they may be more inclined to choose the offer with no contingencies. You may want to consider waiving these contingencies to increase your chances of closing on the house but do so with caution. Consult with your real estate team to see if you should take this risk !

  • Prepare Your Chequebook:

This won't apply to everyone, but having a down payment deposit ready shows the seller you mean business (or have the physical cash). Sellers want to see that you are serious about buying their home and having your down payment ready can help you walk away from the deal as a homeowner. Having money in your back pocket will help you stand out from the crowd of competing offers. Having the full purchase price ready is also advantageous for buyers who do not want to take out a mortgage. Remember that if you make an offer, it will certainly result in a bidding war. Having the full deposit ready to go, on the other hand, allows new buyers to make a statement and demonstrate that they have the financial means to win a bidding war !

  • Include an Escalation Clause in the Contract:

Escalation clauses inform the seller of the amount you'll increase your bid by during a bidding war. You can choose to increase your request by a certain amount each time, as well as set a limit on how much you're willing to pay to win your bidding war. Property prices are rapidly rising, and knowing how high you're ready to go can help you evaluate and tailor your initial offer !

This also informs other buyers of your breaking point and how to get you out of the war, so it's a catch-22 situation. On the other hand, an escalation clause allows you to show the seller that you're serious and willing to increase your offer. When buying in seller's markets and creating an escalation clause that works for you and your budget, working with a realtor can make a huge difference !

  • Make Sure You Don't Skip The Inspection:

When viewing your dream home, a home inspection is usually the last thing on your mind. However, getting an appraisal before paying a deposit or even making an offer can change the amount you're willing to pay or how much you want to buy the house. Inspections give the buyer the upper hand when purchasing a home because they allow the buyer to estimate the cost of any potential renovations. Home inspectors are on your side and want to make sure everything is in order !

Even if you're not in a bidding war, you should get a home inspection if you're thinking about buying one. A home inspection reveals more about the sellers than it does about you. What you learn during an assessment may surprise you, but you can always use it to shape your offers. A home inspection is usually unnecessary in new homes, but it can help you decide whether that historic farmhouse is a good investment !

A buyer's agent is a real estate agent who works with a buyer: It's fine if you don't win the first time you try a bidding war. You'll find your dream home soon enough, and you'll know when it's right when you make that first offer. Consult Guglu Homes for advice on how to win a bidding war and what kind of offer to make on a specific property. Because the housing market is booming right now, use these instructions to help you navigate the etiquette that comes with bidding wars !

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