How to be Competitive in a Bidding War
One of the most stressful situations in home buying occurs when other buyers are competing for the home you want. To make an offer on the perfect house only to find out you have entered a bidding war is certainly frustrating.
Right now in Ottawa it happens pretty often, if there is a shortage of homes for sale, or you are looking in a particularly sought-after area, there's a good possibility you will be competing against a few more qualified and motivated buyers. It’s common to feel helpless as you wait for communications to come back through the agents involved, hoping for some good news.
To that end, I’ve put together some tips for how to make a multiple offer situation as comfortable and successful as possible for my buyers.
Pick a real estate agent who is well organized and an exceptional communicator. A lapse in communication could be interpreted as disinterest. Don’t get overlooked because your agent didn’t communicate with the seller’s agent in a timely manner.
Have your pre-approval letter or proof of funds in hand. You may have a great offer to submit, but if you can’t back it up with proof you are qualified to purchase the home the seller may just move on. Make a cash offer if you are able. If not, make as large a down payment as possible, and use a lender that communicates effectively with all parties.
Offer more than the asking price. Your agent should do a comparative market analysis to give you a good idea on the home value as soon as you decide to make an offer. If it’s not too out of line with the CMA or your budget, offer more than the asking price.
Keep your offer clean and simple. Don’t ask for contingencies that aren’t necessary to closing the transaction.
Shorten the inspection period. Asking for a 2 to 3 day inspection period instead of 7 lets the seller know that you aren’t going to waste anyone’s time. Find a home inspector who has availability to schedule your inspection as soon as your offer is accepted, better yet schedule your inspection prior to submitting an offer so that you have the most attractive offer with the least conditions.
Have your deposit ready. Offer an escrow deposit that sends the message that you are serious about your offer and have the funds ready to turn in as soon as your offer is accepted. You may want to include a copy of your escrow check with your offer.
Offer flexibility with your closing date. Convey through your agent that you are willing adjust the closing date to suit the seller’s needs.
Include a personal letter with a family photo. Let the seller know who you are, what you like about the home, and that you intend to take good care of their former residence. Let them know what it is about the home that has already made it special to you.
Offer an additional deposit after the inspection period. This is another way to let the seller know you are serious about the house and not just trying to get it off the market while you make up your mind or look further.
Consider an escalation clause. Let the seller know your offer isn’t the highest you will go by including a clause stating that you will increase your offer, up to a set price, if the seller shows you a higher offer from another buyer.
Be diplomatic with negotiations after your contract is signed. Remember that the seller has other interested parties to fall back on. If you turn ugly after the contract is signed, making additional demands or not following through with your promises, the seller may hand you back your deposit and work with someone else.