Bidding wars, or multiple offers, have become the norm in Toronto. But there are ways how to win a bidding war on a house in Toronto.
Bidding wars are prevalent in Toronto. It has even spread as far as the suburbs as home prices in the Greater Toronto Area continue to escalate. It can get very frustrating for buyers. Imagine showing up to a house, only to find 10, 20 or even more other buyers vying for the same home that you’ve fallen in love with. Before you head out to look at homes for sale, or even if you’ve already started looking but have lost several times in bidding wars, read on and sharpen up your bidding war strategies.
Strategies on how to win a bidding war on a house in Toronto
There are specific strategies on how to win a bidding war. In Toronto, you’ve got to be very astute when it comes to winning a bidding war. Toronto homes are in such high demand. Remember, there will be one winner as long as the seller gets what they want, and the home buyer is willing to give the seller what they want. These strategies are not a secret. And some require a little bit of common sense. But for the most part, strategies to win a bidding war are very practical. Let’s start from the very beginning.
I never recommend you to overpay for a home in Toronto or anywhere. It just doesn’t make sense. If you don’t see the value, and if you’ve consulted with your real estate professional and they’ve concluded the same thing, just don’t overpay. That being said, you must absolutely know the potential value and price of Toronto houses.
Forget about the asking price. It’s just a starting point. Newbie buyers and newbie real estate agents alike seem to think that offering the asking price, or even lower, will make them win in a multiple offer situation. Wrong. Very wrong. Unless the price listed for the house itself is not reasonable to begin with, most real estate professionals will price homes at a very attractive house, well below the expected selling price.
Instead of looking at the listed price or asking price, you need to explore what similar homes have sold for in the area. This is where you really gauge the value of the house, and the price you need to offer to have a chance at winning the bidding war. Work with your real estate broker to see what homes have sold for, especially similar ones. Accept that you won’t get the house you’re bidding on for the same price as something that has recently sold. Toronto house prices are going up with each sale.
An important piece of advice in figuring out the price is knowing at what number you are prepared to walk away from the deal. Some buyers overpay. And that’s their choice. It may take them years before the home value catches up. Or in quickly increasing price markets, much sooner. You need to know what price you are willing to pay, and at what price you are not willing to move ahead. Be disciplined. Work with your real estate broker to figure this out. And stick to it.
Bring a deposit (bank draft or certified cheque)
Want to show you’re serious about winning the bidding war? Bring cash money. Moolah. But don’t come in with a suitcase full of cash. No. That would be really bad news especially with FINTRAC keeping a close eye on us real estate agents. Go to a bank and get a bank draft of certified cheque made for at least 5% of your offer price. This one single technique on how to win a bidding war on a house in Toronto will already set you apart from the other bidders. I can guarantee that several buyers are not serious enough to bring a deposit to the table. And this is a newbie buyer and newbie real estate salesperson technique. If you’re working with an agent, and they’re not telling you to bring a deposit, and you’ve lost several rounds of bidding wars, you need to educate your agent.
I’m about to contradict myself. I don’t advise you to go into any home purchase transaction without conditions on financing and home inspection. With that said, in bidding wars, you’ve got to throw conditions out the window. (Gasp.) I understand this is a very dangerous position to be in, and I don’t outright recommend it, but that’s the reality in a multiple offer situation.
If this is dangerous, why would I, or any other real estate agent for that matter, recommend doing such a thing? To answer this question, let’s look at a scenario.
Let’s say a home has received three offers. Just three. And all other details being close to what the seller wants, the three offers have the following conditions:
Offer #1: Condition on financing and inspection.
Offer #2: Condition on financing only.
Offer #3: No conditions whatsoever.
Who do you think the seller will choose in this scenario?
Now let’s say offer #3 is even more attractive, with a price significantly higher than the other two. A deposit cheque for at least 5% of the offer price in the form of a bank draft attached to the offer. And all terms the seller is looking for.
Who will win?
If you really want to know how to win a bidding war on a house in Toronto, you have to be prepared to go into a bidding war with no conditions. But I’m not telling you to be careless.
I’m not saying don’t include a financing condition without getting a green light from your mortgage broker and lawyer. Nor am I saying don’t inspect the house or see if there was a pre-listing inspection done.
Who has the power?
The seller, not you. Accept this right from the onset and you’ll be less frustrated in a bidding war. In negotiations, the one who has the power has control. As a buyer, you need to be flexible to accept the sellers terms. Price. Closing, Deposit. Conditions. Otherwise, you’ll always lose.
Some buyers seem to think they can march into a bidding war and make demands. Wrong. If there is at least one other offer aside from yours, you are no longer in control. The seller can ask for, and get, what they want. If you really want to know how to win a bidding war on a house in Toronto, accept this. And as long as the seller’s demands are reasonable, humble yourself to the process. After all, you want that house, right?
A personal touch
The seller has the power, but it doesn’t mean you can’t win them over. Emotionally. You can make the seller literally fall in love with you and your offer with a personal touch. I’ve worked with clients who have gone above and beyond the strategies mentioned above. If you’re thinking of outside-the-box ideas on how to win a bidding war on a house in Toronto, you can definitely be a little bit creative. And personal.
Add a note or a letter to your offer. Introduce yourself and your family. Express to the seller what you fell in love with about their home. Highlight its unique characteristics that you like. Some sellers even like it when buyers say they won’t make changes to the house because it’s lovely the way it is. For example, if the seller has crafted an elaborate garden, say you plan on enjoying it and even adding to it. Don’t say you’re going to get rid of it.
If you want to take it a step further, make a video introduction and present it before your offer. Not only does this distinguish you from the other bidders, but it creates a personal connection with the seller.
How to win a bidding war on a house in Toronto is not impossible. Provided the seller is serious about selling their home, there will be one winner, guaranteed. If you want to be victorious in a bidding war, use the strategies above and be prepared. Your reward is the home you deserve. And nothing feels better than winning a bidding war than the feeling of home ownership itself.