So, you've been tirelessly searching for that perfect property and finally found it! Excitement builds, and you start to plan your offer, when suddenly you learn that yours is not the only offer on the table. You are going to be competing against other buyers interested in the same property as you.
Finding yourself in a competing offer situation can be very stressful. In Alberta, multiple offers are dealt with as "blind bids", rather all offers are prepared independently, without information on what is contained in the others. This was designed to protect the consumer, so that they could make their decisions independent of outside pressures. It was also designed to safeguard against "bidding wars", when buyers continuously outbid each other in a back and forth, similar to what you see take place at auctions. In a traditional multiple offer scenario, each buyer prepares their best offer for submission, and then the seller compares them all, selecting the one they like best to work with.
Contrary to popular belief, it's not just the highest offer price that is chosen by sellers when multiple offers are on the table. Other variables such as the number of conditions and how long they need to be satisfied, whether the possession date is favourable to the seller, any special requests or terms of sale, and how high the deposit is are also factors that are considered by a seller when selecting their preferred offer.
Here are a few DOs and DON'Ts to help give you a competitive edge when submitting an offer to purchase:
Find out how many other offers are being presented to the buyers. Generally, the more offers there are, the stronger your offer will need to be in order to be selected.
Review the recent, comparable sales in the area so you have an idea of what other similar properties are going for. Have your agent provide this information, along with their opinion of value of the home so you know what the home is worth. Keep in mind however, that in a hot market prices are typically on the rise, and in a multiple offer situation it is not uncommon to see a property sell well above the last comparable.
Decide on the maximum you are willing to pay before your emotions get the best of you. This is usually the hardest part of a multiple offer, as many buyers find it challenging to decide on what they might pay without knowing what else others have offered. Our best advice? Figure out a price at which you are both happy that your offer was accepted (knowing the other offers may have been less!) but also the price at which you would be ok with someone else buying it if they offered more. It can be helpful to play out the scenario: If you found out the property sold to someone who offered $1,000 more than you, would you wish you offered higher? What about $10,000 more?
Offer a substantial deposit and have the funds available within 24 hours of your offer being accepted. A good rule of thumb is to offer a 5% deposit. This shows the sellers that you are serious, organized, and financially capable.
Keep conditions to a minimum and have them met as quickly as possible (ie: within a week). Your offer will be more attractive if it is less complicated and has a tight time frame to a firm sale. Make sure you send your mortgage representative whatever they need up front, don't just wait for an accepted offer to start looking into your financing options.
Consider presenting your offer along with a pre-approval letter. Have a pre-approval letter from your financial institution showing you are qualified to purchase can often improve your chances, as the seller is no longer simply taking your word for it.
Consider including a letter about yourself and why you love the home. As cheesy as it may sound, sometimes this can appeal to the seller and can make a big difference, especially if the offers are close to each other, or the property is a family home with a more emotionally driven seller.
Talk about your offer or any personal details while you are on the property. These days, most sellers have doorbell cameras, security cameras, or other kinds of technology that can pick up what you are saying, and they might be listening! Play your cards close to your chest and keep these conversations off-site with your Realtor.
Wait to get your financing arranged. If you will need a mortgage in order to complete a purchase, then you need to get this started ASAP. The further down the line you are on a financing approval, the shorter your financing condition needs to be.
Include "easy-out" conditions such as the offer being subject to "due diligence", "parent approval," "review of the title," or you have to "talk to your lawyer." These kinds of loose conditions are not viewed favourably by a seller and are not likely to be accepted with other offers on the table. Have this sorted out in advance, and put your best foot forward.
Include a list of furniture or extras in your offer when competing with other buyers. Inclusions outside of the norm just complicate a sale and can turn off a seller if they aren't expecting it. You can always approach the sellers after your offer is accepted to ask if they are interested in selling any items.
DON'T take time to sleep on it! If you are serious, be ready to make a decision immediately. In a multiple offer situation, the longer you wait the more offers may come to the table. Or, the property may sell to someone else with a bully offer in the meantime, while you are thinking it over. And, if a seller knows you needed time to think, they may not consider you as serious as someone who was able to make a decision really quickly.
And there you have it! By approaching competing offers with a well-informed and strategic mindset, you increase your chances of an accepted offer. After all, if the property is right, you want to give yourself the best chances of having your offer accepted, so you can do the victory dance in your new home.
Here at Urban Upgrade & NewInfills, we offer more than your standard real estate service. We are a group of highly skilled, professional Realtors with comprehensive knowledge of Calgary's new and resale marketplace. If you have questions about real estate, Contact us today. We would love to chat!