In a hot real estate market, you can’t afford to make mistakes when you put in an offer on a house or condo. A smart offer can be the difference between winning and losing a property, especially in larger urban markets, where you will often find yourself competing with other buyers.
Want to know how to make an offer that the seller can’t refuse? Experienced agents Lisa Peressini and Kyle Roman work in Canada’s two most competitive real estate markets and they can tell you how to seal the deal.
In general, what is the best strategy for making an offer in a hot market?
You have to be prepared,” says Lisa Peressini, a sales representative with Bosley Real Estate in Toronto. That means having a mortgage pre-approval and a substantial deposit on hand.
In terms of the offer itself, try to “come in clean,” says Kyle Roman, an agent with RE/MAX Crest Realty Westside in Vancouver. Do your homework — everything from getting a home inspection ahead of time to understanding your local area’s bylaws — so you can make an offer without conditions.
“In a multiple-offer situation, you cannot have conditions,” Peressini says. “You are never going to get the house.”
And try to find out exactly what the seller wants, Roman suggests. “Find out what their preferred move-out dates are and what items they want to keep,” he says. “Write them a contract where all they have to do is look at it, say ‘awesome’ and sign it.”
How do you find out if there are other offers on a property?
Unless the seller has given specific instructions not to reveal that information, his or her agent will tell you how many offers are on the table and has an ethical obligation not to inflate those numbers, Roman says.
Peressini added “You may know how many offers there are if you are in a competitive situation, but you have no idea what’s in the offers”.
Do most sellers consider all offers simultaneously?
In Toronto, offer dates are standard practice and have been for many years, Peressini says. Generally sellers pick a date a week or so after the property is listed.
For sellers, she says, they feel offer dates provide the best opportunity to get top dollar. “If they sell within 24 hours of the listing, they might wonder if they really got as much money as they could.”
Set offer dates are a somewhat newer trend in Vancouver, but they have been the norm for the past five years or so, Roman says.
What is a “bully offer” and should clients be prepared to make one?
A bully offer, also called a pre-emptive offer, is when a buyer puts in a bid before the set offer date.
To have a chance of succeeding, Peressini says a bully offer, “needs to have no conditions and come in significantly over the asking price; at least 10 percent over asking is common.” She has seen bully offers as high as 18 to 40 percent over the list price.
“It’s [a bully offer] something buyers who have missed out on bidding wars might be more willing to consider,” says Roman. He still advises them to do their homework on a property. “But if you have everything lined up, why not be the first in to see the property and the first to offer the seller a great price with easy terms? That’s what the seller is looking for.”
When is it a good idea to make an offer below the asking price and when is it wisest for buyers to put their “best and final” offer on the table?
If you’re interested in a property that’s new to the market, is in a popular neighbourhood and has a set offer date, “don’t put in an under-asking offer,” says Peressini. “It’s a complete waste of time.”
Roman says that if a property is newly listed, well-priced and has had lots of showings, “you need to go in with your best offer.” But if a property has been on the market for a few weeks, there might be an opportunity to make an offer below the asking price, he says.
Price is generally the reason a property doesn’t sell quickly, but there could be other issues, he says. A condo building might need extensive repairs, or the seller might have unusual terms like a leaseback clause or a long closing date.
“If a property is sitting on the market for more than two weeks or definitely more than a month, that presents a bit of a buying opportunity if you can handle those issues,” says Roman.
How do you figure out if the seller is asking an artificially low price to try to start a bidding war, and how do you deal with that?
A good indicator that a seller has priced his house below what it’s worth is when the listing price is just below the natural cut-off for a property search, Roman says.
For example, a buyer might be searching online for a condo priced between $400,000 and $500,000. Some sellers will price their property just below the top of that range to generate interest, even though they expect to sell for over $500,000.
“If something is priced at $499,000, chances are it’s worth significantly more,” Roman says.
When it’s obvious that a property is priced below what it will eventually sell for — a common practice in the Toronto market — the best idea is to “completely ignore” the list price, says Peressini. Instead, ask your agent to look at the “comps,” the recent selling prices of comparable properties in the area. That will give you the best indication of its true value, she says.
What are the complications involved in bidding on a house that is part of an estate sale or a foreclosure?
You might face delays of a month or more in closing if you are buying an estate-sale property and the will has not yet been probated, Peressini advises.
And you might be dealing with multiple sellers — several beneficiaries named in the deceased person’s will — which can also slow things down, Roman adds.
Foreclosures can also take a bit longer from offer to acceptance because they require bank or court approval, says Peressini. And she suggests you check to see if there is a “right of redemption” clause that might allow the owner to clear up his debts and regain possession of the property, which would cancel your deal.
In both estate sales and foreclosures, Roman and Peressini say, properties are sold “as is, where is,” meaning that it’s especially important to get a home inspection and to have a lawyer on hand to look over the deal.
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