What Should I Offer In a Bidding War?

 This is the question of the day in Southern Ontario.

What to offer when you are in competition for a property you really want.  

REALTORS(r) sometimes have formulas that vary from market to market. For example,  X amount for every offer in the competition or a certain percentage for every offer in the mix.

It’s something but its not full proof by any means.  In a more normal balanced market we can look at the comparable properties that have recently sold but even that is not full proof in this type of market.

The lack of balance in the supply and demand is throwing all logic out the window.  The bidding war seems to be more impacted by where the other Buyers are coming from ( for example from a higher priced market so everything looks like a bargin).  Also on how many times the other Buyers have lost in competition.  Some get so fed up that they go all in on one they really want and often pay tens of thousands of dollars more than the next best bid.  All information you can not get beforehand.

My best advice is to put in an offer at a price that if you lose and are told it was close you will say “that’s okay, that’s what I was willing to pay” or if you win you don’t say, “oh no, I over paid”.  That is your sweet spot and one only you can determine.

If I figure out the formula, I’ll let you know.                                                                                                                                                                                                                    Wish I had a crystal ball! 

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When you only call the Listing Agent to view properties

There are some Buyers out there who will say they only call the listing agents to view properties they have found themselves online or by driving around looking for signs.  This makes no sense to me.  Real Estate services are the only services I can think of where the buyer gets “free” professional services and the someone else pays for them.  The fiduciary duties are owed to the buyer if he/she enters into a Buyer Representation Agreement (BRA) with an agent.  The agency relationship is with the Brokerage.  Without the Agency Agreement you are a CUSTOMER not a CLIENT.

How do you create this agency relationship you might be wondering.  What is the consideration you owe? You owe loyalty.  You pay nothing as long as you are not in breach of your agreement with the Brokerage.

There are three parameters to the agreement.

Time – length of the contract

Geography – the areas it includes

Type – What does it include? Residential, commercial etc.

Some Buyers believe they will get a better chance at “winning” the property in bidding war if they write an offer with the Listing agent, but that is very rarely the case in spite of some of the talk out there.  The duty of the Listing Brokerage is to expose the property to the market and try to get the most favourable agreement for the Seller based on their wants and needs.

We can have a Multiple Representation situation where the Sellers REALTOR(r) represents both parties and that is disclosed to both the Seller and the Buyer.

There are specific guidelines we must follow in these cases.  Some Buyers think that the listing agent can then reduce their commission since they are getting “both ends” and make their offer more attractive.  Yes, that can be done but it must be disclosed to all other REALTORS(r) bringing an offer and in turn their Buyers.

The rules are in place to keep things fair and equitable.  

The best thing you can do is find a REALTOR(r) you connect with and trust and work as a team to find a home.  It is extremely difficult for us out there right now when dealing with a Buyer. It is almost impossible for a Buyer on their own.

 

Good luck and don’t get discouraged.  Just always take your best shot!

 

 

 

 

 

I’m Trying to Buy a Home In Hamilton!! HELP

As promised here is some advice on buying a home in Hamilton during this incredible booming market.

First find a Realtor® you trust and feel comfortable with and sign a Buyer Representation Agreement. Make sure someone is actively searching for you and is “on it”.  If you attempt to search yourself, you will always be a step behind.  It’s tough for us and we get the information the instant it is uploaded to our Association.

Second, set your search up slightly below where you qualify in this market.  Normally we would search just above where you qualify knowing that the homes will sell slightly below asking.  However, in this market in Hamilton it has become “normal” to sell over asking so this gives you some wiggle room to offer over asking if you are not looking at your max.

Third, don’t be afraid of competition.  Look at the comparable sold properties with your agent and decide what you feel the house is worth.  There are some who strategically under price their listings so don’t get too caught up on the listing price.  What is the value?  More importantly, what is the value to you?  Does it meet your needs?  What are your short and long-term goals related to real estate? What about the area.  Are there any external factors that affect the value beyond the regular increase in the market?  What is happening there?

What is the magic number in competition?  That is always changing and is different in every scenario.  A question I would ask you after looking at the comparable properties that are similar and have recently sold is; What is the number that you will be okay with if you lose by a little and if you win, you won’t feel you overpaid?  That is the magic number because it’s the one you will be comfortable with win or lose.

I know it is extremely frustrating but this is happening because you are in the hottest market in Canada and there is no sign of that changing. Hamilton is an excellent place to buy and a great investment.

Lastly, don’t let you emotions get the best of you.  Find a Realtor® you trust and have faith.  It is a difficult process but a worthwhile one and the rewards can be fantastic!

For more information on Hamilton and Real Estate in Hamilton, visit my website at www.HamiltonRealEstateSales.com and contact me at 905-574-4600.

What Is The Right Price To Offer In A Real Estate Multiple Offer Situation?

My clients will ask “what is the right price to offer in competition or when competing with multiple offers in Real Estate?” I tell them the right price is the one where you say                                                 

How do you deal with multiple offers when buying Real Estate?

Scenario One: I come back and say “you lost” and you say “that’s Okay because that’s what I was willing to pay” and or I say “you got it” and you are thrilled.

NOT

Scenario Two: I come back and say “you lost” and you say “I would have paid a little more” or I say “you won” and you  think, “oh no, I paid too much”.

Having said that you must consider that in competition you will likely pay at the top end or over the current perceived market “value”.

By the way market value is defined as “what a willing educated buyer will pay without undue pressure“.  Is competing in multiple offers undue pressure ? Not if you keep your head on straight and make calm educated decisions.

I can only speak with regards to my local market and my experience and knowledge in helping people with their Real Estate needs in the Hamilton, Burlington,  Ancaster and Stoney Creek area but the basics remain the same.

You must ask yourself 

Does this house meets and exceed my needs and maybe even my wants?
Is what I’m looking for hard to find?
Is time on my side?
Are you in an area that will likely continue to go up in price at a fast pace?
Is your plan to stay in the house for a reasonable amount of time? Say over 3 or 4 years.

If it’s the perfect or near perfect house and time is of the essence then you just might just have to bite the bullet and pay more than you think the house is “worth” (remember the definition of value).
You will get the house you want and need and over time your perceived over-payment will be absorbed.

You have to adjust your behaviour in competition based on your own situation after answering the questions above.

One thing to remember is you have complete control over what you are willing to offer on a house you are interested in. As long as you are willing to put your best foot forward, there is no harm in trying. If you don’t put an offer in on a multiple offer situation, you know you definitely won’t get that house.  So take your best shot and rely on the advice of your local trusted Real Estate professional.