Following up from last week’s topic of “Bully Offers” our team got over the negative experience and had a great chat about the key strategies to help our buyers win in multiple offers.
We’ve represented over a dozen buyers this month who’ve won multiple offers and got the home they wanted. Here are a # of key strategies we’ve used to win.
1. Get Pre-Approved
This key first step in the home buying experience is even more critical now in Ottawa’s seller’s market. Pre-Approval with a mortgage lender is a deep process, it’s more than using a calculator on a website or chatting with a lender to get an idea of what you could afford, that’s pre-qualified. Pre-Approvals will request supporting documents, verify your credit, employment, banking history, down payment availability and more.
At the end of the pre-approval process the bank/lender will give you a mortgage commitment letter guaranteeing the amount of a mortgage they would lend you.
We will frequently use these letters, redacted as needed, to prove to sellers that a competing buyer is more likely to be able to afford the home than one who doesn’t have a commitment from a lender.
In some cases, we’ve even had the mortgage broker review and evaluate the home they are planning on buying to get a thumbs up on the property as well.
2. Shop low.
As June 23rd 2020 more than 68% of homes sold in Ottawa were sold For or Over the listing price, and this number climes to over 72% if we just focus on Urban and Suburban zones.
Close to 3 out of ever 4 homes is selling in multiple offers, or with bully offers for more than the listing price.
With that in mind, we are recommending buyers look at homes 5-10% below their ideal price to allow room for negotiation depending on the number of offers a property receives.
3. Know the area you are shopping in.
Many houses selling these days are setting new high prices each and every time one sells. Much of this has to do with the lower number of houses coming out for sale these days, and when we are comparing to a past sale the price may be 6 months out of date. In a market where prices are reported to rise 15-20% the last sale could be $25,000-$50,000 lower than the next.
Do your homework on the type of home you are looking to buy, compare any home sales in the area to the past to see where the trend is going, and ask your buyer’s agent to prepare examples of sales in the area and look closely at their listing price to sold price % and the days on market.
This is a tough one to talk about. As professionals with a code of ethics it mandatory that we help our clients educate themselves about the home, they are purchasing. But in this market, any condition could take your offer out of the running.
We had one buyer recently who offered $21,000 more than the house sold for, but they had a single condition and the seller was willing to take much less to have a “firm sale” over the stress of waiting a week to see if everything was alright with the home.
Each circumstance is unique, so we can’t make a general recommendation here, but I will share some strategies to overcome the need for most condition.
-Financing: Usually the bank/lender needs to evaluate the property as well as your personal finances to guarantee you can buy that home. As mentioned before running the property past your mortgage broker can allow them to take steps to pre-qualify the home as well. Additionally, you can ask your agent to prepare a list of comparable sales that can be provided to a bank appraiser to make your case.
-Inspection: Some sellers offer pre-listing inspection reports and in a few cases home inspectors that have previously inspected their home will offer their reports on the home for sale. Additionally, if you are planning on submitting an offer you can in many cases do your own inspection before submitting the offer. As an alternative you can seek a Home Warranty on the property offered by some lawyers on closing.
-Insurance: You can have your Insurance Broker quote you on a property at any time before the offer or closing.
5. Substantial Deposits
Your “deposit” is usually submitted once an offer is accepted, and historically has been 1-3% of the purchase price. Your deposit is considered part of your down payment.
Lately we’ve been finding offers with a larger deposit are more appealing to sellers considering multiple offers. In a few cases we’ve even seen sellers accept a low offer with a higher deposit because it gives the appearance of financial security on the part of the buyers.
6. Tell a Story
This has taken several forms in the current market. It’s not unusual now to receive letters from the buyers, photos and even videos telling their personal stories to help the sellers better relate to them.
Just this week one of our buyers lost in multiple offers even though they had offered $6,000 more that the accepted bid with no conditions. When we asked the listing agent why, they told us the sellers connected better with the young family that hoped to grow a family in the home, much the same as the sellers had done years ago.
There are 2 points to consider here;
First know who the sellers are by doing a little research so you can offer the best story that will resonate with them. (These same sellers rejected the story of the single dad raising his children and hoping to be in the right school district because they didn’t relate to that experience.)
Second follow a proven model for cover/personal letters.
-Polite greeting and self-introduction.
-Explain how you learned of the property & your excitement about it.
-Show your reasoning for wanting this specific one.
-Explain what buying this home will mean for you/your family.
Bonus Tip: Lose some!
When we were chatting as a team there was one more insight the agents offered, the best way for a buyer to be equipped to win a multiple offer…is to lose some.
While winning a multiple offer is a cause for joy, many of our buyers who do win early in their home buying experience later begin to have doubts. Buyer’s remorse over the price paid for the home is usually only overcome by seeing the market continue to rise, or if you’ve followed tip # 3 you can prepare for it.
Alternatively, by making a few offers on homes and losing out can help build confidence in how the process works, build market knowledge as you see a few homes sell, and sell higher than you thought possible and prepare you to make a winning offer.
I hope these tips have helped you get a better sense of how you might win the home of your dreams in this competitive market.
There are many topics I’ve covered in this post that could have been 1,000 words themselves so if you’d like a little more insight or explanation on any of these strategies, I’d be happy to explain further or just chat about the Ottawa real estate market.
While not every one of these tips works every time, we can help you come up with a plan that’s right for you. Give us a call for a no-obligation chat about your real estate needs at 613-788-2113