Things to Consider When You're in a Bidding War

Bidding wars are commonplace in Toronto's real estate market. If you're in the market to buy a home, odds are you might find yourself in a bidding war. Before you put in an offer, consider the following factors to maximize your chances of winning without blowing the budget.

Don't Just Focus on the Price

In most cases, the highest price offered typically wins a bidding war. But keep in mind that the listing price is often irrelevant when it's set up for a bidding war. Oftentimes sellers list a specific price with the intent of drawing in a lot of attention from buyers to create a multiple-offer situation.

What matters here is how much a buyer is willing to pay for the home, regardless of what it's actually worth. As such, it's not worth placing too much emphasis on the price listed, as it may just be a number chosen to garner attention from prospective buyers. Instead, try to determine how much the home is worth, and base your offer price (and the most you're willing to pay for the home) on the actual value.

Don’t Get Emotionally Attached to the Home

If you're caught in a bidding war, odds are it won't be the only time. If you do win the first time around, congratulations! But many buyers often find themselves in the middle of a bidding war several times before they come out with a winner.

Try not to get too attached to a home just in case it doesn't work out. There's always another house out there.

Have Your Deposit Check in Hand

There are several things you can do to strengthen your offer, and having your deposit check ready to hand in at the time of offer acceptance is one of them. In a typical real estate transaction, buyers are required to provide the deposit within 24 hours of offer acceptance. But in a bidding war, you'll probably need to have that money available immediately if you want to come out as the winner.

The seller just might choose you over another prospective buyer solely for this reason, especially if the offers are almost identical.

Go in With a Maximum Offer in Mind

It's easy to get caught up in the emotions of a bidding war. You might want a home so badly that you're willing to continuously up another buyer's offer just to win. But doing so without having a solid limit in mind can put you in a risky financial position.

Before you go in with an offer, crunch the numbers and establish the highest amount you are able and willing to spend on the home. Once you hit that ceiling, it's time to bow out.

Put Your Best Foot Forward

In a typical real estate transaction, there may be some back and forth between the buyer and seller. You might offer a price lower than what you may eventually pay in an effort to get the lowest price, only to have the seller come back demanding a higher price.

But in the case of a bidding war, you might want to take a different approach and offer the most you're willing to spend. Your first offer is often the last one you're able to make, so go in with your strongest offer.

Keep Conditions to a Minimum

One way to make your offer more attractive to the seller is to make a "clean" offer, which means your offer is void of conditions. That means once your offer is accepted by the seller, it's considered "firm."

Sellers prefer offers with no conditions because that means there's no waiting around for days or even weeks after offer acceptance, during which time there's always a chance that something may go wrong that will nullify the deal.

If possible, try to keep your conditions to a minimum without putting yourself in a compromising position.