How to Beat Multiple Offers?

by : Joe Samson

by Joe Samson, Calgary Realtor

If you've been shopping for a house in Calgary for the last couple of months, I don't have to tell you that the market has shifted again and once again it had shifted dramatically in the favor of the sellers. We are seeing strong similarities between today's market and what we've seen in the spring of 2006. Buyers are still outnumbering sellers and prices are continuing to rise due to strong demand. Those of us who have lived in Calgary for a while, hearing about record real estate statistics is a common phenomena. However it's very important to pay attention to the numbers because it's our best indicator of how is the market behaving right now. In a nutshell, March was another busy month, infect the busiest on record at the Calgary Real Estate Board. 3,939 residential homes exchanged hands, a 12.99% increase over a year ago. Something else that is worthwhile to pay attention to is that new listings are up by 32% over the last year. Theoretically by having an increased inventory available for buyers to choose from, it should dampen the escalation of prices and move towards real estate equilibrium. Just by looking at the number of new listings, someone might argue that we have more products on the market and average prices will level off. It's very important to look at the whole picture vs. just a small piece of a puzzle to get an accurate image of our market place. Higher inventory alone won't necessary slow down the increase of real estate prices, if you increase the number of buyers as well, demand will remain elevated and prices will continue to rise. However as soon as this equation starts to shift either towards the buyer's or seller's side we will be seeing a true shift in our real estate market.

In the first quarter of 2007 we've already experienced and average rise of $53,681 or 14.8% increase in values. In March over 26% of the listing were sold above the asking price indicating that you have 1 in 4 chances to stumble across a bidding war.

How do I optimize my chances of winning amongst competing offers? The shut gun approach right? Offer a stupidly high price and no condition attached to the offer. Unfortunately this is how many people would approach it, by not being conscious about the bank not approving the desired mortgage amount and having the buyer to make up the cash difference or risking a major defect in the home which could cost them tens of thousands of dollars to repair. Or...

1) Work with a real estate professional. Following and expert's advice and guidance of a professional may get you the house you want. Your REALTOR® should be able to prepare a comparable market analysis on the subject property to explore the values of similar homes in the area.

2) Buy first. If you need to sell your existing home, try to negotiate a long closing date to your purchase then you will have sufficient time to sell your existing home. This way your offer won't need to be conditional to the sale of your home. It's a risk that you will need to absorb, but in today's market if you listen to your REALTOR®'s advice, chances are that you won't have a problem selling at fair market value.

3) Have your cheque book with you. Be prepared to buy on the spot. If you've found the home of your dreams, once you've done your preliminary due diligence on the property, have a deposit cheque attached to the offer all the time.

4) Try to put down as large of a deposit as possible. A large earnest money deposit makes a real good impression. The deposit is part of your down payment anyway so there is not much difference in putting it down a month or two earlier.

5) Chose a closing date that the seller wants. If the possession date is not so important to you, you can offer the seller a flexible possession date by giving him the option to change the date between a certain time period by giving you 30 day notice of the change request in writing. This could be a real edge to your offer if you are buying from someone who is selling because they are building a new home. Quite often builders are unable to accurately estimate their completion and this strategy could guarantee the seller not having to move twice.

6) Get pre-approved by a lender. This step is very crucial. Before you go shopping, you want to make sure that you've got the money to back you up. You can ask your lender to provide you with a written mortgage pre-approval letter which you can also attached to the offer to show the sellers that you are good to go with the financing.

7) No contingencies. If there are going to be competing offers chances are really high that there will be an offer on the table without any conditions attached to it. As I mentioned in the beginning, this involves the largest risk that you will need to mitigate. I personally always recommend having a home inspection. If you have a friend in the home inspection business he could come along to the viewing of the house and most of the time an experienced home inspector should be able to give you a good indication about the condition of a building. Financing condition is also very important, usually there could be only two problems with financing. One of them is not getting approved for the mortgage desired amount, but as an astute buyer this step should be all behind you at this point. The other concern could be the property not getting appraised for its purchased price. Prior to submitting your offer your REALOTR® should have completed a comparable market analysis and you should have a good feel for the prices in the area.

8) Predict the competition's offer. As most people think with round numbers, it is likely to expect others to submit an offer either at the next $5,000 or $10,000 figure. Decide what is the highest amount that you are willing to pay for the property and top it up by an uneven dollar amount. This strategy will not only put you ahead of the crowd but it will also make your offer to stand out.

9) Do not submit your offer via fax. Ask your REALTOR® to present the offer in person to the seller. This eliminates the possibilities of anyone finding out the details of your offer and quite often your REALTOR® can draw a friendlier picture about the buyers. Sometimes sellers don't just want the money, but quite often they want to hand over the keys to a person who they know that will look after their old home.

10) Show up for the offer presentation. Typically your REALTOR® would go inside the seller's home and present your offer and wait for the verdict once the seller had a chance to evaluate all of the competing offers. Ask you REALTOR® to arrange the presentation of your offer to be the last one in line and tell him that you will be waiting for him outside. This way your REALTOR® can tell the sellers not to reject your offer if your offer isn't the most attractive. Rather ask for a written counter offer and convince the sellers to give you a few minutes to consult. At that point you can still accept, counter offer or reject the sellers offer back to them. The key to this step is telling the seller that you only need a few minutes to respond because you are just outside to make a decision when most of the other competing buyers would be at home and waiting for their REALTOR®'s telephone calls.

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