Tips on how to Win Bidding Wars in Real Estate
The following interview with Randy Selzer was originally published at www.thecrazymind.com
How many years have you been in the real estate market and what is your background?
I have been working full time in real estate for 22 years. I am currently with a large Canadian franchise, Sutton Group, and prior to that I spent several years at RE/MAX. I started my career with Century 21.
What are the tips for buyers facing a hot property and real estate market/situations?
The current market is extremely hot, and a difficult one for buyers. The first advice I would give is to set a budget, and then stick with it. Get pre-approved at the bank, as it's essential that you know what you are qualified for, in advance. Find an agent who has extensive experience in how to best manage your interests in a bidding war.
How to win?
Each multiple offer is different. Factors include the asking price point of the house, and the number of competing offers. On offer day, your agent will know how many other offers are registered, but he or she will not know the offer prices of your competition. So in essence, you are making a "blind bid". It's important to know if there is only one chance at bidding, or whether there will be a "round two", for improved offers.
How should sellers price the house?
The listing agent will provide you the seller with a Competitive Market Analysis (CMA), which shows recent sales of similar homes to yours. From that data, you will be able to determine an approximate selling price. Many agents will suggest that you deliberately under price your home, to create a bidding war frenzy.
How can the seller position themselves to get the highest price?
The most popular strategy is to only entertain offers after a period of time has passed. If you put your home on the market, for example, on a Wednesday, then only accept offers on the following Monday. This provides time for many agents to show the house, so that multiple offers occur on the Monday.
How to manage the offers?
This is where having an experienced agent really helps. Offers are reviewed on a one-by-one basis, in the order they were registered. Each offer is evaluated, not just on the price, but also on the conditions if there are any, the closing date, the amount of the good faith deposit, and more.
What is the multiple offer process, how does it work?
Multiple offers are when there are several competing offers on a house. Usually the competing buyers are asked to wait until a certain date, and then they must compete with any other offers. Occasionally you will find a "bully offer", or "preemptive offer", where a buyer feels that their offer is so strong, that they won't wait for the offer deadline. It is then up to the seller to determine whether they will consider this preemptive offer.
What kind of insider tips do you have for buyers?
Never, ever have a condition in your offer. You must buy firm, without the traditional condition on finance, or even a house inspection. Consider including a bank draft deposit with your offer, even if it hasn't been accepted yet. Sellers love the certainty of the deposit, if they select your offer. The good faith deposit should be as large as you can manage.
What are some of the risks when you are in a bidding war?
The biggest risk is getting carried away, and paying too much. Sometimes you are up against people who are willing to pay any price to get the house. In those situations, it is often best to walk away. Never pay more than you can afford.
Are there problems getting mortgage financing if you pay too much?
Absolutely! The banks do their due diligence on every transaction, and if they feel you have paid too much for any property, they may decline your financing, or may require you to make a bigger down payment. Always work with an experienced agent who knows how to protect your best interests.
