To a seller’s ear, there are no words more magical than the phrase “multiple offers.” For buyers, these words may conjure up feelings of anxiety as they wonder if they’re about to be outbid on their dream home again. This is the reality of the real estate market all over Canada, especially in the GTA.
Even with record-breaking prices, there are too few houses on the market for the many buyers searching for them. As a result, multiple offer scenarios happen frequently and can even set off competitive bidding wars. The situation isn’t changing in the predictable future, and buyers and sellers need to know how to navigate these multiple offers.
What Multiple Offers Mean for a Seller
Anyone considering putting their house up for sale is in a good position. Listing property in this market almost guarantees a quick sale for far more than you paid for it. Even if you bought your house only a year or two ago, the prices have risen significantly since then. You can count on receiving offers above your asking price and with few or no conditions of sale. However, all that glitters isn’t gold, and you don’t want to become complacent just because the current market is in your favour.
It’s important to weigh and consider your decision carefully and not just accept the highest offer that comes in. A high bid is worth nothing if you have to start the process all over again because your buyer can’t get financing after all.
There are also legal and ethical guidelines you must abide by. For example, you must be honest about other offers you’ve received. You don’t have to disclose specifics, but you can’t pressure a buyer to raise a bid by telling them about offers that don’t actually exist. Provincial law also requires you to state in writing if you intend to look at offers you receive before the official presentation date.
The real estate market can be unpredictable, especially in Toronto. Here are a few more posts to keep you up to date:
What Multiple Offers Mean for A Buyer
Competing with other buyers for a house may feel disheartening, but there are many things you can do to increase your chances of a successful bid. The first step is to sit down with your Realtor® to discuss your options. If this is your first purchase, your agent can see if you qualify for one of the government’s first-time buyer assistance programs.
Getting pre-qualified for a mortgage might be your single biggest advantage when competing with other buyers over a listing. If it comes down to your offer and another buyer who doesn’t have their financing in place, chances are the seller will take you. Knowing how much funding you qualify for will go a long way to helping plan your next steps. You’ll be better positioned to decide which neighbourhood you will choose to live in, and what size house you might be able to buy.
Understand Different Types of Offers
Firm offers, conditional offers, bully offers – what does it all mean? These are all terms you are certain to hear during your homebuying journey.
A firm offer is an unconditional offer to buy a property. If the seller is happy with the price, all they have to do is sign the paperwork, and the sale is over.
A conditional offer means that the buyer has specific terms before the sale can proceed. In the past, almost every offer to buy a property was conditional. A potential homeowner wanted an inspection and to make sure they could qualify for financing. Often, they would even ask the seller to assist with closing costs.
With today’s market leaning so heavily in favour of sellers, you may have to drop most or all conditions to succeed with your purchase. Unconditional offers are very appealing to sellers, even if another bid is higher. This is just one more reason to get pre-qualified before you start househunting. It puts you in a stronger position to place a firm offer.
What is a Bully Offer and Should You Use One?
In more polite terms, a bully offer is also known as a “preemptive offer.” Usually, the seller and their agent set a presentation date for when they will begin considering offers. If a buyer submits a proposal before then, it’s called a bully offer.
For a seller, there are advantages and disadvantages. If the offer is high enough, the seller may accept a bully offer because it saves them from spending any more time wading through other bids. On the other hand, they may inadvertently accept a lower offer than they would have received if they had considered all of their options. Some seller’s agents advise their clients not to look at bully offers.
However, in this market, nothing is written in stone, and bully offers can benefit the buyer and the seller. The buyer can sidestep the competition if their offer is aggressive enough. And the seller may want the convenience and peace of mind of a fast and easy sale.
Is a bully offer right for your situation?
Here are a few things to consider before you proceed.
The law requires that sellers inform other potential buyers that they’ve received a preemptive offer. If your bully offer isn’t compelling enough, it could backfire and spike even more competition. A seller may also decide to call your bluff. After all, if you want the house badly enough now, why wouldn’t you come back on the scheduled presentation day?
Succeeding with a bully offer means bidding far above the list price, with no conditions and a closing date that is agreeable to the seller.
Placing a bully offer is unlikely to help you get a lower price. However, it may increase your chances of finding a new place to call home.
Want to know more about how we can help you find your dream house? You can find out all about our process here.