If you are looking to buy a house anywhere in Ontario (or much of Canada for that matter) right now you will almost certainly be in competition with other buyers for over 75% of the properties hitting the market. While this was traditionally a bigger city challenge for buyers, multiple offers are now becoming the norm in small towns everywhere. 50 to 100 offers on a single property is not unheard of and many areas are averaging somewhere between 10-25 on the most desirable properties.
Just last weekend I showed an absolutely disgusting townhouse in a not so great part of Brampton. By disgusting I mean every wall was COVERED in filth, a kitchen that hadn’t seen a cleaning product in years, potential “fecal matter” on some of the rugs, and I am sure there had to be a bug infestation in there somewhere. We had to cut the showing short because it was just AWFUL and we didn’t want to touch anything. It was a complete gut job, everything had to go. It was listed for $425k. Just the previous week a nearly identical property in the same townhouse complex sold for $510k but it move-in ready condition (though the new listing had 3 parking spaces instead of 2 that the other had). My logical mind still valued this one less because of the extensive renovation that would be required before moving in. This mess of a property ended up getting 15 OFFERS and sold for $25,000 MORE than the nearly identical unit in much better shape that had sold just a week before.
When there are that many offers NOBODY can guess what it will go for because it just doesn’t make sense what some illogical person might pay for it. My advice to my buyer would be the place is maybe worth somewhere in the high $400,000s but that wouldn’t get them the property. But yesterday I was on a call with over 200 Realtors talking about how they approach these situations and some of the best strategies to win in these situations which I will share with you here:
12 Tips To Win A Real Estate Bidding War
- Pick the Right Realtor – Your Realtor is going to be your BIGGEST asset in a multiple offer situation. You need to be able to trust them, they should be a full-time Realtor, they should be a good listener, they must be likeable and they need to be able to work well with others. Before all the part-time realtors get in a tizzy over that second point above, experience matters in these situations and someone selling 2 houses a year is more likely to mess up the paperwork (easy way to have your offer eliminated) or have the experience being in these situations. Plus they probably won’t have many relationships with other Realtors because this isn’t their career and main focus. The relationship between the listing agent and your buyer’s agent is your greatest advantage in a negotiation with more than one offer. While a listing agent technically can’t disclose the exact details of other offers it happens all the time that hints are dropped between agents where an offer needs to be to win. On top of that your agent needs to be able to sell why your offer has the best chances of actually completing the transaction.
- Only Bid If You Want To Win – If my client wants to submit a conditional offer at asking price when there are 5 or more offers in Toronto I will usually advise that this is a TERRIBLE IDEA. The main reason for this is if you aren’t playing to win all you will likely do is drive the price of this property higher which could now be used as a future comparable on another property that you may really want. The more offers a place gets the higher the price will typically go so don’t add fuel to the fire unless you are playing to win.
- Don’t Be Stupid – I know this article is about winning and a lot of these tips make sense when money is no option, but that isn’t the reality 9 times out of 10. People have budgets, properties need to appraise and you should always do your due diligence ahead of time if you are removing conditions from an offer. Also don’t get swept up in the bidding process and set a MAXIMUM offer price.
- Accept That You Are Going To Overpay – When you have more than 5 offers on any property it is almost always going to sell for ABOVE MARKET VALUE. That means that in order to buy something you are always going to have to “overpay” for that property. The saving grace in these situations though is if there are 10+ other offers, you have the comfort of knowing that most of these people are still going to be looking for a similar property after this one sells and that this will be the new comparable for future properties. If you plan to be in a property for 5+ years just think do you think the property will be worth more than what you are offering in that time? Yesterday some agents on the call were even suggesting to pay what they felt was “next year’s price” which I find very concerning and couldn’t in good conscience ever suggest, but this is the kind of advice you will be up against. One suggestion that I thought was great on the call was to start at the list price and keep adding $5,000. If you are still ok with this number then add another $5,000 until you say there is no way I would pay that much. That is your guide for where to set your MAXIMUM OFFER. It should be the amount that if you get outbid and you hear the sale price you won’t care because you would never have paid that much for the place anyway.
- Register Your Offer Early – One way to get brownie points with the listing agent is to be the first one to register. For some reason every agent waits til the deadline or beyond to register their offer which makes it very difficult for the listing agent and nobody ever wants to be the first one. The old thinking behind this was whoever registered last got to present last and could find out where they are better versus the other offers. Nowadays most offers are being handled over email (even before covid hit) so that isn’t such a big deal anymore. By being the one to kickstart things it will help make the listing agent’s job a bit easier and you can remind them of this later on.
- Size Matters When It Comes To Deposits – When I am on the listing side if two agents are close and one has a substantially larger deposit it will install confidence that you can close on the property, even if the property doesn’t appraise. Since you are going to pay the money on closing anyway if you can use it to your advantage in a negotiation why not put it out there.
- Get Your Deposit Ahead of Time – Having your deposit with your offer also strengthens your offer. It does happen where “winning bidders” have second thoughts the day after when they go to get their deposit so if you can show that you have this ahead it shows you are VERY SERIOUS.
- Satisfy Your Conditions Ahead Of Time – Once you get over 5 offers on a property the chances of the seller accepting a conditional offer drop off dramatically. Your offer now becomes a gamble for them to accept because there is no guarantee it will go through. Most of the time at least one of those offers will have no conditions so the listing agent and even though they may be offering less money they may accept that instead because it is a firm offer. When an agent is sorting through 5+ offers you can almost guarantee your conditional offer is getting tossed to the side and if there are over 10 offers, don’t even bother. Your chances are slim to none. Therefore it is important to have a good relationship with your mortgage provider who can give you the green light ahead of time and weigh the options if it doesn’t appraise. Status certificates can be reviewed in advance for condos and there is nothing stopping you doing a home inspection before the offer date.
- Gimmicks Can Work…. Sometimes – You have probably heard stories about people who write a letter to the seller with their family photo attached showing telling the seller how much they love their home and will take care of it. If I am on the listing side, this stuff is just fluff. My job is to get my seller the highest price with the least conditions that will align best with their future plans and has the highest probability of going through. While these things can pull on the heartstrings for some sellers and do work from time to time, once you are over 10 offers, they likely won’t even have time to look at these things. If it is a property you absolutely must have then it doesn’t hurt to do this but try to connect with the seller in the letter and show how you are similar to them (ie. if they are a golfer – ie. you saw a bunch of photos or trophies and you are too, point those things out in your letter in a non-creepy stalker-ish way). These things typically work better on older sellers who have owned the property for a long time.
- Closing Date – Closing date can be a sticking point in offers so if the seller’s have a preferred one make that your closing date too.
- Keep The Offer Clean – Don’t overcomplicate things trying to negotiate in that set of lawn furniture or adding pages of things they need to do before closing. The less confusion your Realtors “standard clauses” create the better. Less is more.
- Come In Strong – There is no guarantee you will get a second chance (though 90% of the time the listing agent will give buyers a chance to improve) but sometimes they will just accept the highest offer if it is significantly more than other offers. A strong offer right off the bat will get their attention.
Something separate from actually being in a bidding war, is you can also use what is called a BULLY OFFER where you submit a strong (typically unconditional) offer before the offer date. I will cover this more in another post in the future but if you have any questions just let me know.
Bidding wars are tough as a buyer and they also make my job very difficult to provide sound advice while also helping my client get a property. I hope you find the advice above helpful and remember these should only be employed if you REALLY WANT TO WIN in a multiple offer situation. But always set a limit and don’t speculate with real estate, buy with at least a 4-5 year plan. These strategies are best if you expect to be in this property for a long time so any overpayment will hopefully be made up by market appreciation in the long run. Whenever you are interviewing a buyer’s agent ask them what other tricks they have up their sleeve. If you are curious, I have a few more really awesome ideas and tricks that I have used but I don’t want them posted publicly in case I am using them for a client and I don’t want other agents just ripping them off. If you are curious just send me an email using the form below and I will share them with you.