Knowing yourself, your finances and working with a trusted real estate agent can help you survive – and even thrive – during bidding wars for any home.
When you fall in love with a home, logic often takes a back seat. Sure, you had a budget in mind, but when you’re in the middle of a bidding war for an $800,000 home, what’s another $50,000?
It’s as if your money has suddenly lost its value.
In some ways, it has. The majority of people buy houses with debt rather than cash. They mistakenly believe that whatever mortgage the bank approves is the same as their budget, without considering the consequences of committing to spend that much money on their lifestyle or credit scores.
However, anyone looking to buy a home in a market like the Waterloo Region knows that house hunting right now can feel like a big money poker game – especially given the number of other good offers you may be up against.
When faced with a bidding war on a Waterloo Region home you’d like – no, make that love – to buy, there are some steps you can take to keep your finances – and your sanity – in check.
Make a Spreadsheet of Your Numbers
It’s pointless to buy a home that you can’t afford to heat or furnish. You must strike a balance between paying a price that is high enough to beat out the competition while also being affordable to you. Just like in poker, know your limit and know when to walk away.
We advise making a spreadsheet because that creates a real, tangible accounting of your financial situation that you can keep referring back too, rather than just having a vague idea in your head that you may forget all about in the ‘heat of battle’.
Work with an Agent who Understands the Local Game
Working with an agent who has dealt with bidding wars in that particular market is an important element, and the more often they’ve done it the better (for you) That means not only working with a licensed realtor, but also one who specializes in the area where you want to buy. Markets vary greatly and often necessitate very different approaches, so you’ll need someone who knows the local game and can react quickly as the market changes.
If you know the market, or rather if your agent knows the market – you can win a bidding war for less than you might think. That means knowing how much the house is worth, how long it’s been on the market, and how many offers are currently on the table. This information will assist you in determining what you should offer.
For example, “multiple offers” might just mean one more, not ten, so you don’t have to go all in to win.
Keep Your Emotions in Check
You might get carried away and overlook the sacrifices you’ll have to make if you commit to a large mortgage if you see the property you’re bidding on as the home you’ll raise a family in, or where you’ll enjoy that glorious retirement in a few years. When making an offer, try to keep the financial and emotional aspects separate, or at the very least be honest with yourself about the decision you’re making and why.
Think Beyond the Dollar Signs
When composing the offer you intend to submit, take a look at what else you have to offer outside the basic dollar amount. Although price is an important consideration, it is not the only one. You can also compete based on the date of your closing, the terms of your financing, and the amount of your deposit.
HomeSellers Need a Plan Too
If you’re selling your home in a hotter market, make sure you have a strategy in place, because while the prospect of multiple offers sounds appealing, there’s no guarantee you’ll get them.
There’s a risk, especially if you decide to hold off on accepting offers or set a deadline for potential buyers to submit their bids. If you don’t get the offers you want, you may have to choose between less-than-ideal offers or risk being in a weaker negotiating position by staying in the market longer.
Whatever side you take, you must ensure that you are protected from unscrupulous or inexperienced real estate agents. There are some basic guidelines they should follow, such as ensuring that offers are registered with the brokerage representing the property for sale and that your agent is informed of the number of offers.
You won’t know the specifics of competing bids, but you’ll know how many there are and from where they’re coming. If your agent, or the other party’s, isn’t forthcoming about what’s going on, it’s a sign that something isn’t quite right.
While bidding wars aren’t something most buyers, and often not even most sellers, enjoy, they are sometimes an unavoidable part of the market, so it’s best to plan ahead and understand what you’re getting into. And to work with a real estate agent who's 100% on your side.