OREA – Frustrations can fly when eager homebuyers run into competition during the offer phase of the home buying process. “Bidding war,” while commonly used to describe offer situations in some parts of the Greater Toronto Area, is simply another phrase for “competition” which can take place in markets all across Ontario.
“Regardless of the market, an attractively priced home that meets the desires of more than one interested buyer will create a competitive situation,” says Costa Poulopoulos, president of the Ontario Real Estate Association. “While great for the seller, competition during the offer process can be frustrating for prospective homebuyers, especially for those whose offer is not accepted. Prospective homebuyers are best to prepare a strategy for competitive situations to avoid disappointment and financial overextension.”
In the heat of a competitive offer situation, some buyers may be tempted to increase their original offer price or waive conditions to increase their chances of securing the home. This is not a good idea, advises Poulopoulos.
“After calculating what you can afford, it is important to set a price limit and stick to it,” says Poulopoulos. “As for conditions, these are in place to protect the buyer. If you decide to waive or withdraw certain conditions on an offer that gets accepted, you’ll be in a bind if you have trouble securing a mortgage, or end up with a home that needs costly repairs.”
Here are some tips to help buyers through a competitive home buying situation:
Check your emotions – home buying can be a highly emotional experience. Rely on your Realtor for objective advice and guidance through the process – he/she can help you avoid becoming too attached too soon to a home, or making spontaneous offers.
Set a price and stick to it – if you’ve worked out what you can afford, then you know the price range of homes that you can consider. Competition may entice you to increase your original offer – avoid doing this. If your higher offer is accepted, your new home will instantly turn into a burden and a bigger financial commitment than you bargained for.
Know what you want – you may feel like you’re at the mercy of the seller, but remember – the seller is probably as eager to sell his home as you are to buy it. Therefore, be firm in areas that are most important to you, and exercise flexibility where you’re comfortable to. After all, simply making the highest offer won’t guarantee you the home. Other factors such as the closing date may play a role. Therefore, make your best offer and hope for the best.
Calculate all costs – after setting your price, don’t forget to account for the extra costs that come with buying a home such as legal fees. That way, if you do find yourself inching over your set price, help rein yourself in by looking at the overall end price including all expenses.
Do your research – work with your Realtor to get a sense of prices in the neighbourhood you’re considering. This research may take some of the surprise out of the process by giving you an idea of what your target home may sell for.
For more information, visit www.wedothehomework.ca.
This article is provided by local REALTORS® and the Ontario Real Estate Association for the benefit of consumers in the real estate market.