How To Navigate Bidding Wars & Multiple Offer Negotiations As A Buyer

Who would have thought that a global pandemic would ignite a competitive real estate market? The typically hot spring real estate market in the Durham Region got off to a late start, and with it came soaring housing prices. On average, we’ve seen a 17% lift in sale prices in a year-over-year comparison. What is the cause of this lift? Bidding wars.

What Causes A Bidding War?

While they may happen at any time, bidding wars happen most commonly in markets with low inventory. Because the ratio of available properties to buyers is unbalanced, you will often see fierce competition that creates a multiple offer situation. A bidding war may occur naturally; however, the selling agent may recommend that their clients hold off reviewing offers for several days after the property goes live. Another common tactic is to use the 24-hour irrevocable clause. Essentially, sellers using a 24-hour irrevocable clause will hold off responding to their first offer for 24 hours in an attempt to allow time for other buyers also to submit their offers.

What Can You Do To Catch The Eye Of The Seller?

There is no denying it. Bidding wars mean approaching your offer differently. In a buyer’s market, you would likely have a home inspection and other conditions or asks that you can include in your offer. In a seller’s market, you need to get creative to get noticed. Many buyers will omit as many conditions as possible. This may include waiving a home inspection, being flexible on inclusions and proposing a closing date that fits the seller’s timeline.

* Before waiving or omitting any of the conditions, make sure to educate yourself on the possible repercussions, if any.

Approaching The Sale As A Business Transaction

Treating the purchase of your home as a business transaction is likely the weirdest advice you’ve received. This is an incredibly important purchase, after all. Unfortunately, in a competitive market, it is probably your best strategy. Here are our tips on how to navigate multiple offers:

Get pre-approved. Depending on your financial situation, you may be able to go in firm…which is appealing to sellers. Your mortgage broker will tell you if you need a financing condition or not.
Review the comparable and data objectively when determining the optimal purchase price. You should also take into consideration the number of offers. A typical rule of thumb is $5000 over asking for every registered offer, but it may exceed that model.
If you’re going to waive a home inspection, be very critical as you walk the home. Look for signs of moisture damage in the basement, take note of any smells or damage, review the condition of the roof and windows, identify the age of the furnace and other appliances included, etc.
Establish a walk away amount, where no matter how much you love the home, you will end negotiations.
Be flexible. Appealing to the seller’s ideal closing date and specified inclusions or exclusions will ultimately work in your favour.

We understand that it is so hard to take the emotion out of the purchase, but it’s an unfortunate reality of being a buyer in a competitive market. Out of 10 offers, only one buyer will walk away victorious. It can be a long and frustrating process, but in the end, the right property will come along, and all the stars will align for you.

You don’t have to go it alone. If you’re looking to buy your first home or make your next move, we’re here to help!