Believe it or not, you do see the words “bidding war” in the title of this post. For some, they thought that phrase went out when the housing economy went downhill. But yes, we are seeing bidding wars more and more when a property is priced right and priced to sell. If a home is a good shape, in an excellent location and the sellers are motivated, bidding wars are making a comeback.
In fact, for some sellers, that is an excellent strategy. Pricing a home correctly is the BEST way to fill your home with buyers. If a multitude of buyers like what they see, they don’t hesitate to make their best offer right away.
So how do you know if a home is priced correctly?
Look at the comps or what is known as “comparable properties.” These are homes that have sold recently in the neighbourhood that have several similar features as your property. Keep in mind that a good real state agent will provide you with the information you need to compare homes. But keep in mind that there is no specific formula for finding the absolute correct price for your home. It’s not that real estate agents sit with a calculator and come up with a magical price. But a good agent, one that is experienced and knows the town well, can help you arrive at a reasonable purchase price for the home you want to buy.
But word of caution: Always make sure you are not overpaying as in the long run, you will lose money when you sell or worse yet, get stuck with a home that is upside-down.
Now that you have found a home that is priced correctly and within your budget, take a look around. This is often where buyers get in trouble, as they don’t take into consideration the cost of any repairs if needed. Is the home in turnkey condition? Or will you need to make repairs right away. If this is the case, then how much will the cost set you back? Hiring a home inspector is critical at this stage of the game. If there are costly repairs, such as a cracked foundation or faulty roof, then this is going to increase your budget big time if the sellers refuse to fix or won’t budge on their price.
Even if a home has minor to zero repairs, think about the costs of moving, such as buying new appliances, maybe adding a fence or putting in landscaping if necessary.
The key is: don’t lose sight of the bottom line. At the beginning of your home search, you had a clear budget in mind. Stick to that amount. If other bidders can afford more, then let them have the house. Bidding wars can be very emotional and for buyers, they want to win at no cost because they think they will never find another house they like as much as this property. Take my word for it, winning a bidding war is short-lived. What is long-lasting is struggling to make the mortgage payments if you can’t afford it.
And remember this as well: a bidding war is basically a game with each buyer trying to outbid the other. In the meantime, the sellers can barely contain themselves that their property is receiving so much attention. But in order to avoid the back and forth that can wear on your nerves, do yourself a favor:
Make your highest and best offer up front.
Why? You may only get one chance to present an offer. If a seller comes back and wants all bidders to increase their offer, don’t. If you have already bid at your highest price, then don’t go any higher. Many buyers that do are so caught up in the bidding game that once it’s over, buyer’s remorse sets in.
Finally, when engaged in a bidding war, always keep the appraisal in the back of your mind. The lender is only going to lend you what the house is appraised for, NOT what you and the seller agreed upon.
Banks won’t lend more money than a home is worth based on the past several years. Therefore, they are looking at each situation from a rational and financial perspective. And so should you.
1. Know knowing what you can afford
2. Selecting the wrong real estate agent
3. Underestimating the real cost of home ownership
The bottom line is that buying a home without a clue of any of the above can cost you thousands and thousands of dollars and make your home buying experience a nightmare that can last for years if you overspend.
Take your time, think with your head and not your heart and don’t stray from your budget when buying your Windsor property.