Buying a house in an overbidding context
Published on December 7, 2020
Buying a house in a market where properties are selling like hot cakes is not always easy. Buyers—who may need to make offers on several properties before one is accepted—will have to arm themselves with patience.
In such a market, it is common for buyers to offer more than the asking price (overbidding) for a house or condo unit. While that will entice the seller, they might go with another offer simply because it does not include a condition like selling another property.
So there are several elements to consider if you want to increase the chances of the seller accepting your offer.
The purchase price
Before offering more than the asking price, which could escalate even more if other buyers are interested and the seller asks for a better offer, it is important to decide the most you would be willing to pay for that property.
Second, it is a good idea to know your borrowing capacity. Getting prequalified for a mortgage is vital in the current market. Not only will it let you know your price range, the letter from your banking institution will give you an edge when the seller has to make their decision.
With these two elements in mind, you will be able to prepare your offer to purchase while knowing your limit in the event of a bidding war.
All aspects of a sale are negotiable, even the occupation date. For example: the seller is having a home built and it will only be ready in five months. If a buyer wants to make an offer to purchase that involves taking possession sooner, they will have to somehow compensate for this. For example, by offering an amount that covers the owner's temporary furniture storage or relocation. Ideally, the buyer should make an offer that meets the seller's needs.
The three main conditions for a sale are proof of financing, a satisfactory inspection and the sale of the buyer's property. Until these conditions are met, the sale is not official. When there are several offers on the table, the seller could opt for the one with the fewest conditions. While buyers may be tempted to remove some of these clauses to facilitate the purchase, it is a good idea to check the implications and risks, notably by contacting a notary in private practice.
The advantage of visiting a house with the owner there is that you can ask all the questions you may have and start negotiating by discussing the elements mentioned earlier. If you are well prepared and know what you need, you will be able to quickly determine if the property has what you’re looking for.
At the same time, you will be able to establish a relationship of trust with the seller by demonstrating that you are a serious buyer. This could make all the difference when the homeowner has to choose from more than one offer.