The following is a guest post by Sherard R. McQueen, Broker of Record and co-founder of M5V Realty Inc Brokerage. Sherard is a experienced agent in the Toronto market and has transacted $200 million in real estate and personally purchased 35 residential and many commercial investment properties.
Toronto is one of the most sought after real estate markets in the world and this has fueled bidding wars throughout the city. Combine a competitive market with an emotional process and it’s a combustible mixture that can take unwitting buyers by surprise. My expectation is that emotion should and will remain an integral part of the buying process, however couple it with a strategic buying approach and you will have enough ammunition to retaliate effectively.
Buyers often browse online for properties and may note that some are priced significantly lower than expected. In this scenario, the listing agent would like to create a multiple offer scenario (read: bidding war), in hopes of obtaining a higher price for their seller client.
Should you come across a property that is priced below market value, call your Realtor and request specific property details including a market value comparison to gauge what the property is actually worth before viewing it. This gives you the option to avoid viewing the property altogether or at the very least allows you to look at it through a more critical lens. Advance awareness of the true value eliminates disappointment on the offer date, which is what fuels overbidding.
Firmness will always trump price — an offer with no conditions is better than a higher priced offer that has conditions. A firm price that is slightly lower but has no conditions means the sale is binding once the offer is accepted and certified funds presented. [As an aside bring a certified draft to any multiple offer presentation, it shows you are “serious”. Realtors always speak favorably about seriousness of clients behind closed doors.] Go in with a firm offer, and you will be in a much stronger position than your competitors. To be able to put in a firm offer, arrange your financing before the offer date and make sure a home inspection has been completed by a qualified home inspector you have commissioned. And yes, you can do a home inspection before an offer date or have an excepted offer; just speak to the listing agent to make satisfactory arrangements.
Be a bully! Although the listing agent may have asked offers be submitted on a certain date a “bully” offer is a strong offer that is submitted before the offer date and legally must be shown to the seller at the first available opportunity. Many times the seller is nervous by day 3 or 4 of a traditional 8 day multiple offer process and when they see a strong offer, are tempted to abandon holding offers and accept it. Sellers are traditionally worried about what happens IF they don’t get an offer, now the seller has a strong offer with only a short time to decide whether to accept or reject. Occasionally the seller will wait for the offer date in lieu of accepting the offer but many times they will acquiesce and except the offer.
Lastly, if all else fails know when to walk away. Trust your agent has done the market value comparison effectively and bid based on the property value, not the situation. Commonly clients get caught in the moment and overpay for properties (and listing agents prey on this vulnerability). However, by using foresight and implementing a succinct buyer strategy you can trump the emotional appeal with your own real estate savvy. Beat the multiple offer, be firm, be prepared, be a bully; own a piece of Toronto at the right price!