This is a question many buyers are asking themselves in today’s real estate market. For many, it seems like an impossible task and after many failed attempts begin to acquire “buyer fatigue” where they lose the motivation to continue their pursuit of buying a new home.
So, how do we avoid “buyer fatigue”? How do we ensure ourselves the best opportunity to win a multiple offer in the face of extremely stiff competition?
Let’s assume we’re in a heated multiple offer market (which most communities in the GTA are going through right now). That means that you’re likely to face at least 3 competing offers for a home that is priced and shows very well.
With that in mind, here are my Top 5 ways to help win a multiple offer bid:
1. No Conditions
This is the absolute first non-negotiable in winning a multiple offer bid. Normally, there are two conditions that buyers would use when purchasing a home: financing and a home inspection.
However, in a heated multiple offer scenario it’s extremely unlikely that you’ll win the offer if you include either of these conditions. Now, your first thought will probably be “I would never purchase a home without doing a home inspection”. And that’s something I would never advise my clients to do either.
Luckily, there is a workaround.
If there is a home that you absolutely love and want to offer on you normally have the option of conducting a pre-offer home inspection. This gives you the chance to do a home inspection before you offer on the property. That way you can feel comfortable putting in an offer on the home while knowing exactly what issues exist with the property.
The downside? If you do a pre-offer inspection and still lose the multiple offer you’re out about $450. Do that 4-5 times and it begins to become pretty expensive. But, that’s why you’re reading this post – to figure out how to do it just once!
The 2nd part of the no conditions offer, or what we call a “clean offer”, is the removal of the financing condition. This is generally easier for buyers to do since most of the time they’ve been pre-approved for a mortgage by their bank or mortgage broker. Before the offer, contact your broker, give them the details, and double check to make sure you would qualify to purchase the home you’re offering on. While this isn’t completely foolproof, by the time you get to offering on a home you both should have a pretty tenable grasp on your ability to purchase a home.
2. Be Flexible with Closing Date
This is a really underrated part of winning a multiple offer bid. Let’s say that you have no conditions and the highest price as part of your offer. At the end of the bid, the agent comes back and says “I’m sorry but we’ve gone with another offer”. You see the winning bid the next day and you know that yours was higher. So what exactly happened? You look at the closing date and it’s three weeks from today. That would have been impossible for you as you still have a home to sell.
So why did the sellers not choose your offer? Maybe the price of the winning offer was close enough to yours and they wanted the faster closing. Perhaps they needed the funds from the sale faster than the 90 day close you offered.
Whatever the reason, it’s extremely important to be flexible with your closing date. What’s even more important is having your realtor ASK the listing agent when the ideal closing date is for the seller. If they say 3 weeks and you know you can’t close any faster than 60 days, you many reconsider putting forward an offer. Or you might be able to work something out and actually be able to close in just three weeks.
Either way, when in a multiple offer, the seller is unfortunately for you, in complete control of almost everything. That means they can dictate when they want the home to close. To ensure you win the offer, be flexible. It’s more important than you might think.
3. Bring a Strong Deposit (in hand)
Depending on your market, the price range of the home and the agent you’re dealing with, the amount requested as a deposit can vary anywhere from a couple of thousand dollars to a full 5% of asking price. On a $600,000 home that can mean having up to $30,000 available to put down as a deposit.
Again, it’s very important for you realtor to ask the agent what kind of deposit the seller is looking for. Some agents are more flexible and will ask for $15K-$20K on that same $600K whereas other realtors are more rigid and always ask for a 5% deposit no matter what.
Either way, it’s important to have those funds available. What’s even more important is you bring that deposit to the table on offer night.
When an offer is made and accepted, usually the deposit is handed in the next day. But, what happens if the buyer suddenly has a change of heart overnight and decides not to give the deposit? It can become quite a messy situation, but without that deposit there really is no deal. As a seller, you’re better off getting that home back on the market and getting the other buyer to sign a mutual release to cover your bases.
So, when you go into a multiple offer with a deposit cheque in hand (that’s a bank draft btw) you’re saying to the seller “I’m serious about buying your home”.
And, if two offers are virtually identical but one buyer brought a deposit cheque and the other didn’t, which offer do you think the seller is going to choose?
4. Get Very Close on Price
I don’t really need to explain this one. It’s sort of a duh moment. Of course you have to have a very competitive price to win a multiple offer. But, I think it’s important for people to know that you don’t necessarily need the highest price to win. And that’s because of what I’ve written above. You can have the highest price but if you have a condition in your offer, a weak deposit, and inflexible closing date, your chances of winning the offer actually aren’t that great.
So, while price is very important, it’s not the be all and end all to winning a multiple offer bid. If it was, this post would be a lot shorter!
With that said, it’s obviously still important to be within the top 2-3 bids when it comes to price. If you’ve followed the advice above then you’ve done everything you can. At that point cross your fingers and hope your bid is the most attractive overall.
But, you might ask, how do I know how much to bid? Well, that’s up to the experience of your realtor. If they work the market you’re looking in and know it well, they’ll have a pretty good idea of how much it’ll take to win the offer based on the number of offers you’re competing against as well as the recent sales history of the area and the competitiveness of the current marketplace.
It’s not an exact science, but a good realtor will have some tricks up their sleeve to get you an advantage in terms of how much to offer. It’s also very important you know your limits in these situations and to understand how much you’re willing to offer for the home because there can be points where certain bidding wars become pretty ridiculous.
5. Hire a Personable, Experienced Realtor
I personally have a pretty good track record when it comes to winning multiple offers on my client’s second attempt. That’s because most buyers need to learn the hard way about the realities of today’s marketplace. They trust me throughout the process but they don’t quite believe me until they go through that first multiple offer and see exactly how much they lose by. And, honestly, it’s generally a huge wake up call for them.
However, on that second attempt, they’re fully on board and the success rate is much, much higher.
But it’s not always just up to the client and how flexible they are and how much money they’re willing to bid. There is a lot of influence that an agent can have on the proceedings. Does the realtor know the listing agent? Do they have a friendly relationship? Have they worked together before? Any edge that you can get in a multiple offer…you take it.
I won’t give away all of my secrets, but there’s a certain courting or wooing process that happens in the build-up of a listing. Normally there will be about a week for everyone to see the house before offer night. In that time the buying agent can build a friendly relationship with the listing agent that may just see some unknowing bias be given to the buying agent…if you catch my drift.
The point is, this is still a people business and people want to be treated well. So it’s very important for your realtor to be very experienced within the marketplace and to be very personable with those people that hold your fate in their hands.
Winning the Multiple Offer
These are the 5 top ways to win a heated multiple offer. They won’t work every single time, but if you follow this advice you’ll put yourself in very good contention to win from the start.
If you have any questions about this topic please leave a comment below or contact me!