{"id":190711,"date":"2019-03-21T15:52:05","date_gmt":"2019-03-21T19:52:05","guid":{"rendered":"https:\/\/www.livabl.com\/articles\/?p=190711"},"modified":"2019-03-28T14:51:23","modified_gmt":"2019-03-28T18:51:23","slug":"how-to-win-a-bidding-war","status":"publish","type":"post","link":"https:\/\/www.livabl.com\/articles\/guides\/how-to-win-a-bidding-war","title":{"rendered":"How to win a bidding war (without buying a house you can\u2019t afford)"},"content":{"rendered":"

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This past summer, Liz Bertorelli started feeling cramped in her Queen West condo and in all honesty \u2014 wanted a backyard for her beloved French Bulldog. She became a regular at real estate viewings in Toronto and got familiar with something many homeowners in competitive markets have come to dread: the bidding war.<\/p>\n

After one too many viewings (and lost bids), Bertorelli and her partner went to see a semi-detached home in the east end. It was beautiful. Others would certainly think so, too.<\/p>\n

\"\"<\/a>Photo: lizbee9\/Instagram<\/a><\/em><\/p>\n

\u201cThe most stressful part of the process was the bidding war,\u201d she says. \u201cWe saw the house and thought \u2014 it\u2019s beautiful, there goes our chance.\u201d But instead of throwing in the towel, they got organized and gathered an A-team of industry professionals to help. They were so prepared, Bertorelli actually made the winning offer while her partner was on a plane. At the end of August, she shared a picture on Instagram <\/a>holding blueprints with the caption, \u201cIt\u2019s official, we got the blueprints and are mapping out exactly how many dogs we can fit into our new home. Still doesn\u2019t feel real.\u201d<\/p>\n

Livabl spoke to Toronto-based realtor Roger Travassos and mortgage advisor Matt Yakabuski for their advice on surviving a bidding war \u2014 and knowing when to walk away.<\/p>\n

\"\"<\/a>Photo: James Bombales<\/em><\/p>\n

The danger of going in blind<\/h2>\n

In Ontario, when a seller receives multiple bids, the broker can disclose the number of competing offers but not the competing price. In hot housing markets, this method means that buyers can end up blindly offering more than they initially planned or far more than the others to beat the competition.<\/p>\n

As of January 31st, the Ontario government announced that they are reviewing this rule<\/a> to give homebuyers increased access to information during a bidding war. This change could benefit both the buyer (who can better make an informed decision) and the seller (who can rest easy knowing they aren\u2019t missing out on bids by deterred homebuyers).<\/p>\n\n

In Australia, bidding wars couldn’t be more transparent \u2014 they literally take place on the front porch, with homebuyer hopefuls present and accounted for. And you don’t need an agent to access critical information like home inspection results, sales histories and the statistics on other sales in the neighbourhood. With the exception of Nova Scotia and New Brunswick, Canadians rely on realtors to get the dirt necessary to close on a house.<\/p>\n

Across the border in Buffalo, you don’t even have to go online to get this information. Every home sale gets real estate in the local paper<\/a>, which advertises the past and present homeowners and the sale price.<\/p>\n

\"\"<\/a>Photo: James Bombales<\/em><\/p>\n

Teamwork makes the dream work<\/h2>\n

\u201cMake sure you have a team in place before you start looking,\u201d explains Travassos. This includes a mortgage advisor, a lawyer, and a realtor who can all work together to bring you to the finish line.<\/p>\n

\u201cMy real estate agent and broker were extremely helpful in the process. They basically held my hand through everything,\u201d says Bertorelli.<\/p>\n

\u201cWhen my clients find a property they love, it doesn\u2019t necessarily happen during business hours,\u201d Travassos says. \u201cGetting ahold of your mortgage advisor at the bank is not always easy. When a client expresses interest, I get on the phone with the mortgage agent I work with directly to crunch the numbers on a property.\u201d<\/p>\n

At a bank, it\u2019s shift work where appointments can\u2019t always happen at your convenience, in a pinch or in the heat of a bidding war. Yakabuski worked at a major bank for eight years and has spent just under a decade on the other side as a private mortgage broker. \u201cWe\u2019re pretty much self-employed,\u201d he says. \u201cI come to the office during regular hours but I\u2019m available if need-be outside those hours.\u201d<\/p>\n

Or there was the time Travassos wasn\u2019t certain the kitchen had been built with a permit. \u201cMy client wanted to put in an offer, so I had a conversation with a lawyer,\u201d he says. \u201cYou have to have your whole team working for you. So when you go into it, you\u2019re already in a great position.\u201d<\/p>\n

\"\"<\/a>Photo:\u00a0CafeCredit.com<\/em><\/p>\n

Do the math and respect your budget<\/h2>\n

Getting pre-approved for a mortgage is an important element in the process of buying a home. If you\u2019re entering a bidding war, it\u2019s essential.<\/p>\n

This means a lender has checked your credit and verified your documentation to approve a specific loan amount for a particular period \u2014 arming you with the knowledge of how high you can take your offer. \u201cYour income documents, downpayment confirmation and credit have to be thoroughly reviewed and up-to-date,\u201d explains Yakabuski. \u201cThis provides you with a safety net to know high you can go with your offer.\u201d<\/p>\n

Just because you can hit the ceiling of your lender\u2019s approval, doesn\u2019t mean you should. This means going through your budget long before you put in an offer. \u201cInstead of people asking me what they can afford, I ask them what they\u2019re comfortable spending on a monthly basis on mortgage, property tax, heat, hydro and more,\u201d says Yakabuski. \u201cThis varies from person to person. Some people are conservative, some people are less risk-averse and want to know what their maximum value is.\u201d<\/p>\n

To get a true sense of affordability, shift your focus away from the listing price of the property and more on the monthly carrying costs. While it\u2019s heartbreaking to lose a bid on a difference of $500, staying within budget means you can feel good about the offer you\u2019re putting forward \u2014 and you won\u2019t end up house poor.<\/p>\n

\"See\r\n SEE ALSO:<\/span>A first-time homebuyer\u2019s guide to avoiding the house poor trap\"><\/b>A first-time homebuyer\u2019s guide to avoiding the house poor trap<\/a><\/strong>\r\n <\/div><\/b><\/p>\n

\"\"<\/a>Photo: James Bombales<\/em><\/p>\n

Unconditional love<\/del> offer?<\/h2>\n

Sellers love firm offers during a bidding war \u2014 meaning little or no financing or home inspection conditions. Put yourself in their shoes \u2014 if you back out because of financing trouble or can\u2019t stomach the leaky roof discovered by the home inspector \u2014 they have to start over. In a competitive market, this just won\u2019t do.<\/p>\n

\u201cProfessionally and ethically, I tell people not to go into things without a financing condition and inspection to protect them. But in certain circumstances where you\u2019re in a market where you don\u2019t necessarily have that luxury, it\u2019s important to do your due diligence,\u201d says Yakabuski.<\/p>\n

Start by getting your pre-approved financing in place, then move on to home inspections. Often sellers hoping for multiple offers will have a pre-listing inspection done. It\u2019s up to you if you\u2019re comfortable taking their word for it. If the thought of unexpected home repairs keep you up at night, you can do your own pre-listing inspection before you make an offer. Sure, it\u2019s $500 for a house you may never live in, but it can save you a lot of heartache down the line.<\/p>\n

\"\"<\/a>Photo: James Bombales\u00a0<\/em><\/p>\n

Forget the listing price. What is the home worth to you?<\/h2>\n

Paying more than you think a home is worth might help you win a bidding war, but you won\u2019t come out on top when it\u2019s all said and done. Remember, the home is an investment and if you overshoot the value of the house, it\u2019ll take much longer to see a return. On the other hand, you\u2019ll also play a losing hand if you get too attached to the listing price \u2014 vowing to not pay a cent over asking.<\/p>\n

\u201cI\u2019ll tell my clients the stats,\u201d says Travassos. \u201cSometimes they don\u2019t care and it takes a few lost offers for them to see what they\u2019re up against in the market.\u201d<\/p>\n

Before getting swept up in a bidding war, it\u2019s important to do your homework to determine what other homes in the neighbourhood have gone for. Then look beyond the property. Are there local schools and daycares in proximity? Public transportation routes and easy access to parks? How far is the nearest grocery store? Are future housing and city developments coming in? Determine how much all of this is worth to you. The truth is, the value of the home is whatever you\u2019re willing to spend on it \u2014 but doing the legwork will help you come up with a realistic offer you can feel good about.<\/p>\n

Put (some) of your money on the table<\/h2>\n

Bringing a certified cheque deposit on offer day (usually 5 percent of the price of the property) is yet another way to stand out from the crowd.<\/p>\n

Bertorelli showed up to her future home with a deposit in hand on offer day. \u201cBuying a home the second time around was a lot easier because I had that mental checklist to run through \u2014 make sure you have the money, don\u2019t go over your budget,\u201d she says.<\/p>\n

Making your cash liquid is a game of timing. It\u2019s not fun to miss out on an opportunity while you\u2019re waiting for your RRSP to hit the bank.<\/p>\n

\"\"Photo: James Bombales<\/em><\/p>\n

Get personal<\/h2>\n

Money talks, and so does a high bid, a certified cheque with your deposit, pre-approval for financing and taking care of a home inspection. But a personal touch \u2014 like a hand-written letter or thoughtful email \u2014 could help you seal the deal over another bidder. Remember, just like you, sellers are experiencing their own roller coaster of emotions and knowing their home is going to someone who will truly value it could be more meaningful to them than you will ever know.<\/p>\n

\"See\r\n SEE ALSO:<\/span>A first-time homebuyer\u2019s guide to managing emotions when making life\u2019s most stressful purchase\"><\/b>A first-time homebuyer\u2019s guide to managing emotions when making life\u2019s most stressful purchase<\/a><\/strong>\r\n <\/div><\/b><\/p>\n

Know when to call it quits<\/h2>\n

Maybe the reality is that you could barely afford the listing price \u2014 let alone a bidding war. Or you put your strongest offer forward and still came in second.<\/p>\n

Bertorelli missed out on a laneway house in the west end before setting her sights on the east end, which was an entirely new part of the city that she had never considered living in. She\u2019s now thrilled to call it home \u2014 and her French Bulldog couldn\u2019t be happier with the backyard.<\/p>\n

If you feel you\u2019ve missed out on the dream home \u2014 again \u2014 hold tight. Travassos never hears his clients wish they\u2019d gotten the other property instead, when they do finally close. \u201cThere\u2019s always another house, it\u2019s okay to move on,\u201d says Travassos.<\/p>\n