Buyers dealing with competing offers (Multiple offers); what are the best strategies? PART 1
What is a multiple offer? Multiple offers happen when there are several buyers interested in a specific property. Multiple offers can occur in any market condition; for instance, a unique property may attract interested buyers. However, multiple offers are more common in the seller's market. It is referred to as the seller's market because there are fewer houses for sale, and the market favours the seller.
Sellers market. In the seller's market, buyers are competing and driving the homes' prices higher, a phenomenon continuing in many cities in Canada for some time now. In addition to increasing prices, buyers have to deal with multiple offers, often when they present an offer to buy a home they like.
Multiple offers, bidding wars create uncertainty that is usually nerve-racking for the buyers. Some buyers go through a number of these bidding wars to finally purchase the home they want. If you ask the experienced real estate agents, they also testify that experience has not been comfortable on many occasions, to put it mildly.
What are the strategies you can use to increase your chance of winning the bidding war? Experience real estate agents deal with bidding war all the time; they have learned to check their emotions and have a proven strategy. Before you venture out and start looking for properties, spend the time interviewing the real estate agents and hiring someone who has seen it all and can work for you.
You should discuss the strategy with your real estate agent, ask questions to grasp the details thoroughly, and be prepared. Here I will point out some of the approaches that we have used to benefits our clients.
What is in the seller's mind? It would be best to put yourself in the seller's position; what are the crucial factors for the seller to accept your offer. The most important factors are price and to make sure that the buyer can close the deal at the closing date.
Offering the best price you can, considering the real market value. Your real estate agent will prepare a comparative market analysis to identify an accurate market value for the house. It would help if you considered the highest price possible; your offer may end up being the top choice.
In a bidding war, you'll likely pay more than the appraisal value, the fact that you need to consider.
Escalation clause. An escalation clause is a useful tool to provide price flexibility and outcompete the competition. There is some skepticism about using an escalation clause; it is likely because of the lack of experience, knowledge. You may want to ask your trusted real estate agent and consider using it.
What is an escalation clause? Here is how the Real Estate Council of Ontario (RECO) describes the escalation clause.
"An escalation clause, also known as an "escalator clause," is a term that can be used in a buyer's offer. The clause is designed to defeat competing offers by automatically increasing the buyer's purchase price by a pre-set amount to trump a competing offer."
You may choose an upper limit purchasing price; to avoid going over your budget. The escalation clause indicates your seriousness to buy the property and provides the extra flexibility to outbid other buyers.
Strategies that can help you win with competing (multiple offer) situations. PART 2
The above Real Estate article was provided by David Khosravi, a leader in his field in North York, Willowdale Real Estate, Reach out to David via email: firstname.lastname@example.org or by phone: 416.990.2424
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