In Canada, home sales for 2020 increased by a whopping 25%. If you're looking to purchase a home this year, you could end up in a bidding war.
Not sure what bidding wars are? Below we're going to provide a comprehensive guide about what to expect when you're looking to purchase real estate in Canada and how to prepare to tackle bidding wars the right way.
Before we can tell you how to win a bidding war, you need to know what it is. Bidding wars are only beneficial for the seller because they can expect to get an optimal price for selling their home.
As the buyer, bidding wars aren't in your favour because you're competing against another buyer for a home. When it comes to bidding wars, the price will continue to rise until one potential buyer is outbid and withdraws their candidature.
It's essential to know that there is nothing illegal about the seller's real estate agent purposefully creating a bidding war atmosphere. Their duty is to get the seller the most money for their property possible.
Blind bidding is causing frustration for the buyers, especially with the housing market prices on the rise.
Buyers are also facing several issues with the way that real estate agents are selling homes. According to the law in Canada, agents are not supposed to disclose the information of each offer. But the law, is often ignored by the agents.
Blind bidding is bidding on a home without knowing how many other bids have been entered. The main issue with the blind bidding process that makes it unethical is, as mentioned above, the behaviour of the real estate agents.
The real estate agent acting on behalf of the seller will tell those looking for a home what they want to hear. This is to persuade them to place a bid on the higher end of the spectrum without knowing the prices of the other offers.
For example, the agent will tell potential buyers that an offer has been entered at a specific number to entice the buyers to present an offer that is higher than the highest bidder.
If you find a home that you can't live without, there are some things that you can do to put in an offer that will compete with others.
As a seller, one thing you look for when it comes to buyers is whether or not the buyer has been prequalified. This shows the seller that the buyer is serious about purchasing a home, and they're not just looking around.
Another reason to get prequalified is to know how much you would be approved for if you were to seek a loan. This helps to ensure that you don't look at homes that might be outside of your budget.
A lender will review your application, and if they approve, they will send the information to your real estate agent, letting them know how much you've been approved for. The advantage to obtaining a preapproval is that it shows your credit history is in good standing.
Working with a real estate agent who knows the housing market will prove to be an incredible asset for buyers and sellers. From the seller aspect, the real estate agent will know what buyers are willing to pay and can help you set your home up in a way that only to attracts the highest bids.
For buyers, the real estate agent will be skilled in the art of negotiating to ensure that you create an offer that works for your needs and will be accepted by the seller. Real estate agents also have inside information to help you close on the home you truly want.
One key advantage of using a real estate agent is knowing how to use the information to get your offer accepted. For example, if they know the seller needs to make a sale quickly, they will format your offer in a way that gets the home off the hands of the seller for the right price in the least amount of time possible.
You want to do what it takes to make yourself and your offer stand out from other buyers, right? The best way to do this is to write a letter to the owners of the home detailing why you're the best person to sell the home to.
Your agent will help you to craft a letter that will move the sellers and make them strongly consider the home offer that you've submitted. The advantage of writing a letter is that you're appealing to the homeowner's emotions.
You're letting them know how purchasing the home will help fulfill your needs and dreams. It helps if you detail what drew you to the house and how you'll be able to see your family thriving in their home.
A huge no-no when purchasing a home is skipping the home inspection. Home inspections are a great way to gain more understanding about things that need to be repaired in the home and other factors that could influence your decision to purchase the home or not.
Typically, after receiving a home inspection report, your real estate agent will draft a letter that details a few things you'd like the seller to take care of before the closing date.
Be aware that it's not in your best interest to ask the seller to fix everything wrong with the home. Therefore, you need to carefully consider things that truly matter over things that can easily be fixed, like changing the paint on the walls.
Your agent will give the sellers a timeline to have the repairs made, and the inspector will go back in to ensure that everything is in order.
The downside is that if you skip the home inspection, things could become costly for you if the repairs needed are more extensive than you initially thought. Although you're doing what you can, in the end, bidding wars aren't likely to end in your favour.
Typically, when you see the asking price of a home, that's what you base your offer on, but as of recently, the asking price displayed is the starting price for a home. The agent will use the base price to gauge how much buyers are willing to pay and continue to increase their asking price from there.
The prices of homes is affecting the whole economy. Homes are beginning to be overvalued, and the price they're listed at is causing buyers to remove themselves from the home buying process completely.
Some sellers are even intentionally pricing their homes below market value to stir up a bidding war and end up with above market market value offers.
When it comes to bidding wars, you've got to do whatever it takes to win the home of your dreams. Above, we've detailed some useful tips to help give you the best chances to win your bidding war.
You need to find an agent with a great deal of knowledge about the Canadian house market and take the time to get prequalified.