You’ve found the home of your dreams — it’s in the perfect neighbourhood, just the right size and at a price you know you can comfortably afford. But, there’s a catch. There’s more than one buyer seriously gunning for the seller’s confirmation of acceptance signature. So, how do you make your purchase offer stand out from the others and seal the deal? In the words of The Godfather’s Don Vito Corleone, “I’m gonna make him an offer he can’t refuse.”
Housing markets across Canada are firmly tilted to the advantage of the home seller — housing supply is low and demand for entry-level and middle-market housing is high, which means hopeful buyers are facing rampant competition. Bidding wars and multiple offer scenarios are the norm now, prompting buyers and their agents to get creative if they want to catch the attention of the seller. Maybe it’s an appealing offer price, or even a buyer’s letter that wins the seller’s favour, but whatever strategy you pull from the playbook, you need to act fast.
“I’m going to speak for the current market right now — inventory is really low, and things are getting multiple offers, so if you saw something that you like and they’re not holding back offers, it’s in your best interest to move as quickly as possible,” says Roger Travassos, a Toronto-based sales representative with Re/Max Edge Realty Inc. Brokerage.
If you’re heading into a multiple offer scenario or are preparing for an offer presentation night, never fear. With some pointers from Travassos, you’ll be able to take your purchase offer from spectator to contender.
Know the limit, and stay within it
When making the biggest purchasing decision of your life, determining how much you can afford is not only a critical step, but is a sure means of determining whether or not you’re a worthy competitor from the get-go.
If you’re in the serious stages of a home search, it’s generally advisable to have at least spoken to your bank or mortgage broker to understand what price point you should be looking at. Travassos explains that this step allows buyers to focus specifically on what they can afford and put forth a strong, confidently-priced offer.
With that in mind, in a multiple offer scenario, it’s only worth participating if you’ve got the financial chops to compete from a price perspective. If you’re coming in at your maximum price point without much wiggle room, and you know that the property is entertaining multiple offers, Travassos explains that it’s time to walk away.
“Somebody else is playing to win, and when you put in an offer, in their mind, they’re thinking, ‘I have to make my offer that much stronger,’” he says. “You’re essentially driving the price up when really you have no possible actuality of getting it.”
Bidding wars are known to hike up the price of the property as buyers fight to outbid one another. In a scenario where there might be four, five, even ten offers, the sold price of the property will be beyond the top of your budget, and likely nowhere near where the original offer prices started at. Your time and energy is better spent in a bidding war where you stand a chance.
“You’re really just playing a part in driving up the price. That price is going to be the new norm for the next sale, which in the end, hurts you. If you’re not playing to win, don’t play,” says Travassos.
The offer presentation bully
If you’re looking for leverage against your competition, catching them off guard could slingshot your offer ahead of theirs.
A pre-emptive offer, also known as a bully offer, is one strategy buyers use to get their offer presented ahead of everyone else. When listing their home, sellers may decide to set an offer presentation date, a future day where they’ll review all offers at once, which allows them to build demand and encourage bidding for their property. A bully offer is one that is put forward before the offer presentation date instead of waiting. As long as the seller doesn’t have explicitly written instructions that they will not look at pre-emptive offers before the presentation date, the offer must be presented.
“In a market like this, where inventory is low, and it’s a very strong seller’s market, it’s a good strategy for buyers,” says Travassos. “You’re catching people off guard, so people who want the property but may not have had a chance to look at it yet, [and] there’s other people who’ve had a chance to look at it that may not be as organized as you to act on it.”
However, there’s no point in expediting the offer review process if your pre-emptive offer doesn’t bring something to the table, or you’re not prepared. Make sure that you’re organized — have your documents ready to go and financial affairs in order, and omit conditional clauses in your offer. Pre-emptive offers typically use a take-it-or-leave-it approach, so they shouldn’t come with any strings attached.
“In a market like the one that we have right now, where you have to act fast, if you have a condition of financing or a home inspection, they’re probably not going to accept it, especially if you’re bringing it pre-emptive,” says Travassos. “If you give an offer early, they’re going to say, ‘Well, no. How about you go and do a home inspection right now and get your financing together and we’re going to leave the house on the market for a few days.’”
Adding a personal touch
Coming out on top in a multiple offer scenario doesn’t always boil down to money.
A real estate agent is an extension of you — the buyer — and your offer. A professional and personable approach can make the difference in a world where agents can act like jerks and limit face-to-face interaction during the transaction.
“Aggressive agents can throw off a seller, for sure,” says Travassos. “Your agent represents you and who you are. How they carry themselves and that transaction, to the other agent and the other seller, is huge.”
When entertaining an offer, Travassos advises that presenting in person is the best way to go. It provides an opportunity to leave a good impression, give more information and allow the selling side to get immediate answers to questions. It also allows the buyer’s agent to see the seller’s reaction if the buyer chooses to write them a letter.
In a multiple offer scenario, adding the personal touch of a thoughtful letter can be enough to convince the seller on an emotional level.
“Tell them what you love about the house, tell them a little bit about yourself,” says Travassos. “I work with a lot of younger couples. Tell them what you’re doing — you’re starting a family, you’re looking forward to building dreams in the house. Paint a picture of who you are and submit that with the offer.”
In one such case, Travassos was representing the selling side with a homeowner who was very adamant on waiting for the right seller at the right price. After a while on the market, a buyer approached him with a letter, one that expressed a shared love for family and the life this buyer would make in the home.
“And the seller came down, and was far more flexible than he had been in the eight months before this, and it was all because someone hit a string with him,” says Travassos. “It meant something more than just a sale. He was giving it to someone like him.”