Most people hate bidding wars: I don't.
Bidding wars (multiple offers) are predictable and orderly once you've done enough of them. I started selling real estate just at the tail end of the condo boom so I've been in my share or bidding wars- hundreds of them in fact.
After you've been involved in this many multiple offer situations you start to see patterns emerge. Once I know the type of bidding war I'm in I can usually predict what it's going to take be the successful offer.
Before I tell you how to crush bidding wars, it's important to identify the various multiple offer situations you can get in to first:
- Three offers or less- this is the toughest one to predict. Sometimes some or all of the offers are very aggressive and sometimes they are passive. I hate these; especially when you're heads up with another offer. It's very tough to predict. My best advice is to be disciplined. Pick a price that is justifiable and don't deviate too much from that.
- 4-6 Offers- The majority of multiple offer situations will fall into this category and this is what we'll assume is the scenario for the purpose of this discussion. Generally speaking, 2 or 3 of the offers will be bunched very close together in terms of price. The rest will be outliers.
- 7 Offers Or More- These are simple but expensive to win. It's usually a number way over asking and is impossible to predict. In this instance, you write down the highest price that will allow you to sleep well at night and cross your fingers.... and hope.
Most of the time, the listing agent will know multiple offers are coming based on how the property is priced. They will schedule an offer night where all interested parties can submit their offers. Usually it's at least 5 days after the home has hit the market and everyone knows full well when the date is coming.
In a bidding war, you can expect the unexpected. Sometimes, you will be given a chance to improve your offer if you and another party are "close." Other times you won't.
Sometimes you present in person, sometimes by email. It's always different. I've used the same blueprint for success in hundreds of multiple offer situations regardless of the scenario. And best of all, you don't always need the best price to win.
- Price- The easiest way to win a bidding war is with the best price. But before you go empty your bank accounts to make an offer you should consider some things. How long you plan to hold the property? If rates change will you be able to afford it? Careful analysis is important when deciding on a purchase price. The best price usually wins but you need to make sure you can afford it even if things go sideways.
- Conditions- The fewer conditions in your offer the more attractive it will be to a seller. What is a condition? A condition is a clause in the agreement that allows you time to perform due diligence before your offer is firm and binding. The most common conditions are 5 business day home inspection and mortgage financing conditions. Normally, you have a few days before the 'offer date' when the home is being marketed to the public. Use those days to perform your due diligence instead of doing it after your offer is accepted. If you need to do a home inspection, DO IT before submitting your offer. Most sellers will allow it prior to the offer night if you ask nicely. Speak to your mortgage broker as well so they can give their input as well. Not only will it get the sellers attention but having fewer conditions may sway the seller to your offer even if your price isn't the highest.
- Tell Your Story- Your agent should be doing this with every offer. If they're not, FIRE THEM!! It works. Sellers love to hear about the people buying their home. Example:
I submitted a blurb about my client's when I submitted my offer. It mainly told their story as a young, expanding family which is pretty run of the mill stuff. Unbeknownst to me, my clients and the sellers lead parallel lives that were 25 years apart. The sellers also had kids two years apart and bought the house when they outgrew their Toronto condo. The sellers identified strongly with my clients and accepted their offer despite it being significantly less than highest offer.
- Get Creative- My client is a renowned chef in Toronto. As part of our offer, he treated the sellers to a 'chef's table' experience where they would eat and drink like royalty at his restaurant for free. We weren't the best offer to start, but the sellers liked this perk so much they gave us a second chance to improve our offer. In other offers, we've offered Leafs Box Seats, Raptors Playoff tickets and free advertising consulting with an advertising agency. Anybody can write the biggest number on a piece of paper but not everyone can offer a unique experience.
I can't stress enough that price is the key to any offer. You can be the nicest person in the world but you won't look near as nice as someone offering $50K more than you.
The key is to use all 4 of these tips to varying degrees to push your offer over the top.
Good luck to you.