Offer Night: How to Win the Bidding War
If you are planning on offering on a property for sale in the City of Toronto, you may have heard about (or already experienced) the elusive offer night scenario. This essentially means the seller will not entertain any offers until a specific date and time. The purpose is to allow the opportunity to maximize the marketing period and exposure of the home. And, at the same time elicit the highest number of offers. Additionally, potential purchasers compete with each other in a bidding war scenario. This is a key factor in the success of the sale.
The 3 Listing Prices Buyers Should Consider
What many do not realize is that oftentimes, when a property is holding off on offers, the marketing price is strategically listed for under market value. The purpose is to capture a wider audience and bring as many buyers forward with an offer on offer night.
This means, with any given property listed for sale, there will be three prices:
- Marketing price: what the property is listed for
- Market value: what the property is worth, based on past comparable sales
- Sale price: whatever a purchaser is willing to pay for that property
Usually, these three numbers will differ quite a bit. Knowing this, it’s something buyers should consider when evaluating an offer price to present to a potential seller.
Securing the house when in a bidding war takes knowledge, commitment, preparedness, emotional intelligence, and guts. Sometimes the difference between the top offers that have been presented to a seller are very slight. Frequently, there is no clear-cut winner and the seller is forced to make a judgment call. In this high-intensity, emotional rollercoaster of an experience, only one buyer gets the house. So, make sure you stack the cards in your favour to have that buyer be you.
13 Ways to Win the Real Estate Bidding War
We’re spilling the tea and providing you with all of our secret “keys of success” ingredients for coming out on top and winning on offer night.
1. Make the first impression count.
Try to meet the seller or their agent prior to offer night. Sellers like to sell to people they have met and feel would be good buyers for their home. Attending a weekend open house is a good way to make that happen.
2. Understand the market.
Know the market so that you are in a position to bid high but not overpay. Your realtor should provide you with a comprehensive pricing analysis and recent comparable sales. This is to help you establish the market value of the subject property.
3. Bid as high as you can.
Fact: sellers (almost) always sell to the highest offer.
4. Offer your top price in the first round.
You are not guaranteed to get an opportunity to improve your offer and most listing agents will only give potential purchasers one opportunity to present their best and final. Usually, if two or more offers are virtually identical, only then will those candidates have a chance to improve.
5. Prepare your deposit.
Provide a large deposit with the offer (note: this is different from your down payment). Huge deposits (10% or more) greatly impress sellers. Additionally, having your certified cheque or bank draft ready and presented with your offer paperwork demonstrates you are a serious buyer with a strong financial covenant.
6. Consider adding a clause in the offer.
You might want to think about inserting a clause in the offer. It should state that, should you (the buyer) default on the purchase and not close the transaction, the deposit will be immediately released to the seller. Your lawyer might not like this but sellers love it.
7. Accommodate the seller’s requested possession date.
Even better, offer the seller a flexible possession date within specific dates. This gives the seller the opportunity to set his/her exact preferred date.
8. Provide few, if any, conditions.
There are two key conditions to keep in mind:
- Building inspection: prudent buyers want to have a house inspected before submitting an offer. This is understandable. However, you have to balance your need to have a building inspection with the fact winners in a bidding war of multiple offers, usually have firm unconditional offers. Consider having the property inspected before you submit your offer.
- Financing: get your financing in place before you submit an offer. Talk to your mortgage broker, your bank manager or existing mortgagee before you get to the offer submission stage on a house. This way, you know exactly what you can rely upon them to provide.
9. Prove your ability to close the transaction.
Perhaps impress the seller with your career. Or, have a letter from your bank stating you are in a position to close the transaction.
10. Don’t ask for too much.
Avoid asking for things in the offer that the seller has not already included in the sale. This will make your offer seem convoluted or a hassle to deal with and likely deter a potential seller from wanting to work with your offer.
11. Write a letter with your offer.
Maybe write a note to include with the offer about why you want the house. Selling a home is an emotionally driven process and a seller will want to know that the next owner of their home will care for and appreciate it as they did.
12. Be available.
To win the bidding war, keep yourself available when offers are being presented. Totally, 100% available for last- minute discussions, negotiations or clarifications. Attending an offer night in-person and staying nearby while your agent goes in to present is the best way to ensure you are available to respond to any requests or changes made by the seller.
13. Have faith and trust in your realtor.
If you don’t trust your realtor by the time you are into a multiple offer scenario, you are dealing with the wrong realtor. The experience and counsel a trusted realtor can and should provide when in multiple offers can absolutely win you the house. Your realtor should provide you with insight and informed options. Consider them and make the most aggressive choice you can in the bidding war.
Buyers, Are You Ready to Win the Bidding War?
One comforting reality is that a real estate bidding war usually takes place only on good properties. Paying top dollar for a house today may prove to be a bargain in hindsight tomorrow. Today’s multiple offer winner / buyer may also be putting themselves in a seller’s multiple offer scenario when selling in the future. Nothing is more gratifying.
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This article is written by Urban enthusiast and food/travel junkie, Jessica Elizabeth Spillas. As the firm’s multi-talented Business Development Manager and Sales Representative, she is able to pair her passionate approach to buying, selling and investing in Toronto Real Estate with her flair for design and digital marketing. With this in mind, Jessica delivers unparalleled service with every interaction and works hard to keep her clients and colleagues organized and working at top-notch efficiency.
