Do you feel nervous when it comes to bidding on real estate?
Do you shy away from competition?
Are you constantly losing in the bidding wars?
Don’t you wish you knew some basic strategies so that you’ll have the upper hand next time?
First off, in this hot Vancouver market, bidding wars are inevitable. It doesn’t matter whether you’re buying a house, condo, townhome or duplex, you’re going to be buying something that others can’t wait to buy.
Let me first dispel a common myth first.
Myth: Bidding wars mean that I am going to overpay for the property
No, not necessarily. If there’s a bidding war for the property you want to buy, it’ll mean a few things:
1. The property and/or neighborhood is in high demand
2. In bidding wars, there’s only 1 winner, meaning there are a bunch of buyers who still want to buy that property or similar properties in that area, leading to increases in market value for that area.
3. Bidding wars sometimes occur because the property was priced at below market value to start with
4. If you win a bidding war, you may be able to flip it to one of the bidders who didn’t win for a quick profit
In a hot market, there is a lack of inventory, meaning there are more buyers than there are sellers. In a normal market, buyers would typically write offers with a number of subject clauses to protect themselves, such as, a subject to financing clause, a subject to home inspection, a subject to reviewing the title search, etc…
When bidding wars occur, you’ll see many offers that do not have subject clauses, aka subject free offers. I haven’t really seen many offers where a subject offer won over a subject free offer except when the subject offer had a price that was significantly higher than the subject free offer. With a subject free offer, sellers know that once they accept the offer, the deal is pretty much firm. Why would a seller accept a subject offer where buyers take their time to remove the subjects, and there’s a possibility that the buyer may not get financing or the buyer may change his/her mind?
So, some basic strategies to use when entering a bidding war are the following:
1. Have your Realtor present the offer in person if possible. It’s always nicer to put a face to the offer and offers a personal touch to the offer.
2. Offer a higher deposit than normal. A typical deposit is 5% of the purchase price. Offer a higher deposit. It’ll show to the seller you’re more serious.
3. Attach a copy of the bank draft to the offer or even better, attach the real bank draft with the offer when your Realtor is presenting the offer. That REALLY shows the seller the buyer is SERIOUS.
4. Write a subject free offer if possible, but make sure you do your due diligence. Writing a subject free offer without doing your due diligence is not a wise decision. Make sure you have your financing in place before writing a subject free offer. Make sure you do your home inspection before you write the offer if you’re worried about the condition of the property.
These are some basic strategies. There are some advanced strategies that I coach my clients on. I also cover some of them in my book, The Book on Vancouver Real Estate.