If you’ve been shopping for a new home, then you have already experienced the craziness of the red-hot real estate market firsthand. You see home after home, and are continuously outbid. Your frustration grows as you see your dream home slip through your fingers time and time again. With so few listings, the market is only going to heat up further. As more and more buyers get excited about buying in the spring market, the process becomes more and more difficult.
So how can you come out as the winning bidder…… without overpaying?
Here are 7 tips that can give you the upper hand over your competition:
- Choose The Right Realtor
- Put in a Serious Offer
- Put in a Firm, Condition Free Offer
- Choosing The Right Mortgage Broker / Know your budget
- Give a Larger Deposit
- Set a Shorter Closing Date
- Include a Letter To The Seller
1. Choosing The Right Realtor
All realtors are not created equal, so you’ll want to put some effort in choosing the right one. While you’ll want to deal with someone who has experience, there are is a lot more to consider before making your choice:
Are they passionate about their profession?
Do they truly care about your needs and wants, or are they more focused on their own?
Do they have your best interests in mind?
Are they patient and willing to put in the effort to find the property that is perfect for you?
Are they readily available, and quick to respond to emails, texts or phone calls?
Is their communication clear and concise?
Do they listen to you and respect your point of view / opinion?
Are they professional in their appearance and the way they conduct themselves?
The above should also be considered when choosing a mortgage professional, which I’ll get into later in this blog.
Ideally, get a referral from someone you trust, but be cautious of anyone referring their friends or family. Don’t get me wrong here, they could be the best realtor in the country, but just make sure that they are referring them for the right reason, and not just because they are ‘a realtor’.
We deal with many great realtors and would be happy to connect you with a quality real estate professional in your area. I would never refer you to someone just for the sake of passing their name on, nor do I accept any additional incentives for it. My reputation is far too important to me, so I would only refer someone who I know is solid.
2. Put In a Serious Offer
Go in with a serious offer that will get the sellers attention. You have no power to negotiate price, so if you’re looking for a deal, then expect to be renting for the foreseeable future. I’m not saying to put in a bully offer, that is one where you’re bidding well above the market value of the home, but you want to be high enough to get the seller’s attention.
The asking price doesn’t mean anything these days, as properties are often listed low to attract more potential buyers. A low offer won’t even be reviewed. A solid realtor can help you with your bidding strategy and can advise you on the real market value of the property.
3. Consider Putting In a Firm, Condition Free Offer
Given how hot the market is, you may find it challenging to get your offer accepted if it’s conditional on financing, inspection or anything else. Some of the more desirable properties can have literally have dozens of competing offers. While the seller will look at the highest bidders first, they are also looking at the conditions.
Conditions give the buyer a way out, which makes your offer considerably less desirable to the seller. In fact, they might pass on higher offers, solely based on them having conditions attached. As they are conditional, they are not a sure thing, which makes them far less likely to be accepted.
This is why it’s important to get prequalified or preapproved for the mortgage, allowing you to shop with confidence.
I’ve never been a fan of the term ‘preapproval’, as it’s misleading. You’re technically not preapproved for anything, and many ‘preapprovals’ aren’t much more than rate holds. They are not legally binding whatsoever.
We always take the time to review your situation in detail to ensure you’re well positioned prior to putting in a firm offer. Although risk is minimal in most situations, it’s important to understand that funding is never guaranteed and putting in a firm offer is always done at your own risk.
I would highly recommend reading my blogs listed below, which I consider a mandatory read for anyone looking to purchase a home:
Everything You Need To Know About Getting A Preapproval
Is It Okay To Put In An Offer Without A Finance Condition?
What Happens If Your Appraisal Comes In Low?
Everything You Need To Know About Proving Your Down Payment
Conditional offers are not popular or ideal for the seller since it protects the buyer. You may also want to remove the home inspection condition as well, but it’s important that you understand the ramifications in doing so. This is something you should be discussing with your realtor in detail.
4. Choosing The Right Mortgage Broker / Know Your Budget
The first step of the home buying process is to contact a mortgage professional to determine how much you will qualify for. In the competitive sellers’ market we are experiencing today, ensuring that your financing options are clear is of paramount importance prior to making an offer to purchase.
As you’ll likely have to go in with a firm, unconditional offer if you want to have a chance at having it accepted, choosing the wrong broker can end in financial disaster. Mortgages have thousands of moving parts, and there are many things that can be missed. Sometimes issues can arise right up until closing date, so you want to ensure you’re working with a competent and experienced professional.
There are good and bad apples in every profession, and in an industry where 5% of the professionals account for 90% of all the business, mortgage brokers are no exception. A mortgage is one of the largest financial decisions you will ever make, so it’s important not to trust it to just anyone.
You have a lot of money riding on this, so I can’t stress this point enough.
One of the biggest mistakes made is choosing someone based on rate alone. Sometimes trying to save a few dollars per month can end up costing thousands down the road. This is why it’s important to ask a lot of questions when making your choice. I have an entire chapter dedicated towards in this in my book, Beat The Bank – How To Win The Mortgage Game In Canada.
It’s that important.
This applies equally to both mortgage brokers, and mortgage specialists at the banks. There is a lot of incompetence in this industry on both sides unfortunately, so it’s important to choose wisely. Do a Google search of the mortgage professional you’re considering working with, and check out their Linkedin profile. For all you know, you could be taking advice from someone who is only a few days on the job.
5. Make a Larger Deposit
Show the seller you are serious by putting down a larger deposit. This will give your offer a higher perceived value to the seller, which may get you additional consideration.
If you’re purchasing a property for $1 milion, and give a deposit of $10,000, then the seller likely won’t take your offer too seriously.
If you give a deposit of $100,000, then you’re sending a message to the seller that you’re serious.
I’m not saying that you must put down $100,000 to get the sellers attention but wanted to illustrate the point. Your realtor will be the best to advise you on the the right amount. A large deposit alone won’t be enough to get your offer accepted, but it could be the deciding factor if the competing offers are otherwise similar to yours.
You also may want to consider attaching the deposit to the offer, which can give you a huge edge over competing offers. You’re standing out from the competition by not only providing a larger deposit, but by giving it to them up front as well.
6. Set a Shorter Closing Date
Sometimes sellers are motivated by shorter, or flexible closing dates and may give preference to them. It’s not uncommon for buyers to need more time to close, especially if they have their own property to sell. The seller may not want to wait that long, and an offer with a shorter closing period may sway their decision in your favour, even if your offer is lower.
I would recommend requesting the closing date to be thirty days; however, three weeks shouldn’t be a problem in most cases. Just check with us first. It’s possible to get it done in as little as two weeks, however this is a bit too close for comfort, and lender options might be more limited. For this reason, I do not recommend closing dates shorter than three weeks.
The seller may have a specific closing date that works best for them. If you can be flexible and accommodate their desires, then your offer becomes all that more attractive to them.
7. Include a Letter To The Seller
Include a letter to the seller to introduce yourself. Let them know why you love the home and why they should consider your offer. No one does this, so this will make your offer stand out.
Now they see you are a real person, and this helps them to form an emotional connection with you as well. Let them know that you’ll be taking great care of their home. Complement them on the job they have done with it. Everyone loves complements, so use that to your advantage. Many people are passionate about their homes, and they may even have sentimental value to them. Even if you’re not the highest offer, a compelling story that demonstrates their home is going to good people might be enough for the seller to accept your offer.
Conclusion
It’s not always the highest offer that gets accepted. While none of the above points would be enough to get your offer accepted by itself, the combination of all of them can give you an edge over your competition.
Stay motivated and focused on your goal! Do not take it personally when sellers reject your offer. Learn from the experience, and move forward. Visualize your offer as already being accepted and imagine that you’re already living in the home.
This is YOUR new home… now go get it!
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