Last month, my clients spotted a listing for a house in their dream neighbourhood in North Burnaby, listed at only $799,000. The first thing they asked me was, “Is this for real?”
Yes and no.
Yes, the house really was for sale. It wasn’t a former grow-op and it wasn’t a teardown. It was a nicely renovated bungalow on a standard-sized lot that would make a great family home. Were they going to get it for $799,000? Of course not.
The listing real estate agent used a not-uncommon tactic: price the house below market value to attract as many potential buyers – and bids – as possible. At the first open house, 300 people showed up.
When buying a home, people normally expect a little give-and-take between the buyer and the seller. But in a multiple-offer situation, you are not negotiating with the seller – you are courting them. Your offer needs to be the most attractive to beat out all the others.
So how do you put together that winning offer? There’s more to it than just going in with the highest price. Your offer needs the fewest possible number of subjects – or to be more accurate, no subjects.
If that sounds risky, well, it certainly can be. A no-subject offer means doing your homework before you offer, rather than after.
Home inspection: Get the home inspected. You need to know exactly what condition your potential future home is in, and to factor in expected costs associated with the findings. This helps you determine how much you will offer, but more importantly, it lets you remove one major common subject from your offer. A pre-offer inspection will cost you, and if your offer isn’t accepted you won’t get that money back – but it gives you a much more competitive offer as well as peace of mind if yours is the winning bid.
Documentation: If it’s a strata property, receive and read all documentation. This includes, but is not limited to, the past two years of all meeting minutes; current bylaws and financial statements; Form B (information certificate from the property management company); depreciation report and engineer’s report (if either or both are available); a copy of the registered strata plan and any amendments to it; and a copy of the title search. If you have any questions or concerns, these need to be addressed and answered before you offer.
Property Disclosure Statement: Obtain and approve a copy of this document.
Oil scan: If it’s a house, have a reputable company scan the property for oil tanks.
Financing: In a bidding war, you must go in without any subjects, including subject to financing. This means you absolutely must have your finances in order. If there’s any chance you won’t be able to pay what you’re offering or get a mortgage, it’s time to reconsider whether this is the right offer for you to be making. Don’t risk being in breach of contract.
Recent sales: Now that you’ve done your homework, your real estate agent should have done their homework as well, finding recent sales in the neighbourhood for similar properties to help you determine market value. Remember that market value is the price people are actually willing to pay, which does not always coincide with the listed (or asking) price.
Your best price: How much is this property worth to you? What’s the price you’ll be happy to pay for it? And at what price are you okay with letting someone else win it? Think about how you’ll feel if someone else gets it for less than what you’re willing to pay.
In a bidding war, you need to put your best foot forward and offer your highest price. You may not get a second chance. Sometimes a few offers are close and you get a chance to submit another one, but you should assume this won’t happen.
Dates: Give the completion and possession dates that are best for the sellers. This is another way to woo them and make your offer more attractive than the others.
Deposit: Your real estate agent should include a copy of your deposit cheque with the offer. This demonstrates to the sellers that you’re serious enough to go to your financial institution and get a bank draft for a handsome deposit.
Now that you have done everything you can to put your best foot forward, it’s up to your real estate agent to present your offer. If it turns out that someone else was willing to pay much more than you for this property, take comfort in the fact that you tried your best. But more likely, you will be celebrating your win and the purchase of your new home.
And my clients? I’m happy to report that their offer beat the other 34 – yes, 34 – offers. They move into their new home in June.