The Ontario Real Estate market is so hot right now, and many of our clients are asking how to win a bidding war. So, we have compiled a list of considerations for those looking to buy a property right now to help you win in a bidding war.
Know your budget
While this seems like a no-brainer, we often have clients come to us after signing a purchase agreement without knowing whether or not they could afford the house.
Knowing how much you can spend on a home purchase is essential and can be easily accomplished by getting pre-qualified for a mortgage. A mortgage pre-qualification can provide valuable insight into what you can afford and guarantee a mortgage interest rate for up to 120 days.
The pre-qualifying process will provide you with your budget as it looks at your down payment, source of income and other qualifying measures to identify how much you can afford when house hunting.
We also recommend you consider what the house is worth. This analysis is often overlooked during bidding wars as emotions run high. However, similar to knowing your budget, it’s essential to work with your real estate agent to understand the market, including information and stats on home sale prices of comparable homes in the same neighbourhood and under the same market conditions. Having this information and pre-qualification can help you determine an offer that you’re comfortable with and whether it makes financial sense to enter a bidding war.
Do your homework!
Like most things in life, it’s important to do your homework before you begin house hunting. Here are a few helpful tips and resources to get you started:
Work with a mortgage broker that understands your specific needs. For example, if you have bruised credit or are recently self-employed, you will want to work with someone with extensive experience getting mortgage funding as traditional banks may not be an option.
Visit neighbourhoods that you are considering getting a feel for the shops, dining, schools, community activity and other areas of personal interest.
Work with a reputable realtor who is familiar with the area and with buying in this market. Like your mortgage broker, their expertise will save you time and possible frustration in a bidding war.
Know what Government resources are available to you. There are many Home Buyer programs just waiting for people to leverage! We have a helpful list of resources available to help you as you do your homework!
What makes a strong offer during bidding wars?
In a seller’s market, having fewer conditions on your offer can work in your favour. In bidding wars, offers with few or no conditions are looked upon favourably by the seller, but that may not benefit you as the purchaser.
Pre-qualify for a mortgage. Knowing what you can afford and not over-extend yourself will give you confidence in your offer.
Flexibility on the closing date seems like a manageable condition to wave and may work in your favour if the seller is looking to move sooner than later.
We recommend every offer be conditional on financing and a satisfactory home inspection. In a seller’s market where bidding wars are happening, a home with issues may not give you leverage or negotiating power, but it may help you decide if the home is worth what you’re expected to pay. And if you include a condition of financing, you can walk away from the offer with no penalties if your financing is denied or the financing terms are not satisfactory.
Have a plan
If you have done your homework and have a great team of mortgage and real estate professionals helping you, create a plan and stick with it. Identify what conditions are a must, what you are willing to wave and know your budget. If you have a plan in place, you can be prepared to make an offer before a home hits the MLS system or gains buyer attention through an open house (pre-qualification is a must in this situation).
Bidding wars can be stressful if you haven’t done your homework. It’s important to get pre-qualified before you house hunting and know what conditions you can remove without risk to you and your finances.
We want to help you get the finances you need to make your dream of homeownership come true.
Contact us to see how we can help you win the bidding war!
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