Kim Mullan Blog
Multiple Offers in a Seller's Market: Can You Afford to Compete?
So...you have your pre-approval in place. You know what you can afford. You have signed a buyer agency representation agreement and have your Realtor® guiding you and advising you as to valuations, neighbourhood, future risk and potential challenges.
However you find yourself in a Seller's market where there is little inventory and a waiting audience of buyers for new listings. You might find yourself in a situation you weren't expecting or prepared for financially or psychologically.
If a property is having a lot of showings and holding off offers it's a clue that they might be positioned for more than one offer in which case you would need to act very quickly if you feel it's a good fit for you.
If you hear other offers have been received and still want to see the property during the irrevocable period (before the existing offer expires) here is what you need to know so you can make a decision in a timely manner and understand the risks you might have to absorb:
1 - There is no point in looking at the house if you aren't prepared to write a strong offer immediately after viewing the property as you already know you are in competition if a prior offer has been registered. If it turns out to be the house of your dreams but you don't want to compete or offer over list knowing there are multiple offers in play it's probably not the right house or situation to rush into a showing.
2 - Conditions will start to disappear as the number of offers received increase. Long financing conditions will not be attractive and you may be competing with people who don't require a financing condition. This is why it's imperative to know what you can afford and have your mortgage broker on board and on speed dial. If you will need some time for financing conditions make them as short as the broker will allow and be ready to provide a written approval from your lender to put the sellers mind at ease that it should simply be a formality. NOTE that if you pay a premium for a property and your lender's appraisal doesn't reflect your purchase price you will be required to come up with enough cash to offset the difference on closing.
3 - Home inspections will start to disappear. If you are not comfortable with this have a pre-insepction set up for your showing time prior to making your offer so you understand what risks you may have to absorb.
4 - Closing dates will become very flexible. What does the seller want? Can you accomodate it? Offers with terms the seller doesn't find appealing must be mitigated by strongly inscenvitizing other terms. Higher priced offer may balance an unfavorable closing date etc.
5 - Don't add any chattels the sellers hasn't offered as part of the listing. If you must make sure your offer compensates for it.
6- Remember that the listing details indicate the starting point for the sellers expectations on price, closing dates, chattel inclusions and they have communicated that to all the buyers you are competing with. From that point it will be about the most attractive offer and although price, chattel, conditions and closing dates are factors- Price often overrides the remaining factors. Often, but not always, which is why you want your Realtor® ready to provide their experience and expertise in sizing each unique situation.
7 - Requiring a condition to sell your own home is often referred to as "the kiss of death"in a bidding war/ multiple offers. Can you absorb the risk of carrying your own home if it's not sold in time? If not this may not be the right property or the right time. Make sure you understand the difference between carrying a 2nd property and Bridge Financing. Bridge Financing is only a temporary measure if you already have a FIRM OFFER on the sale of your own home and are trying to coordinate different possession dates.
8 - If there is more than one offer registered to be reviewed do not assume you have time to consider this property at a later date or even tomorrow. Sellers know that Buyers will pay a premium when there is enough consumer confidence that the risk of losing the house is real and imminent and they will likely be considering the offers in hand as the strongest offers they are likely to review. Waiting until you have made a decision won't likely interest the seller when they have more than one "bird in hand" in a highly motivated scenario.
9 - Ask your Realtor® if the market conditions and increased activity around a certain listing make it a viable option for you before investing your emotional energy in a scenario that won't likely have a successful outcome for you based on your offer requirements.
10 - Finally, if you like a property DON'T WAIT. Be first. Make your offer while you have the opportunity to negotiate your inspection and all the conditions you need to put your mind at ease. Keep in mind that while your offer is still valid the seller can receive other offers as well but MUST INFORM YOU if the situation has changed and you are forced to compete as you will be given the opportunity to revise your offer terms before they are reviewed.