The good news is that bidding wars are happening more and more frequently with Windsor real estate. With home prices inching upwards and inventory heading downwards, buyers are out there and ready to make offers and finding they are not alone.
However, there is bad news with bidding wars as well – if you are the buyer that is. With competition in some areas fierce, buyers are tempted to go over their budgets to get the home they want. How can you avoid overpaying for a home when making an offer and find that you are competing with others? Here are a few of my suggestions:
1. Pay attention to the comps:
Whenever you are considering making an offer on a home, look at the comps. This is basically what other similar style homes in the neighbourhood SOLD for, not the price they were listed. Talk to your real estate agent to get nearby comps and study them well before making an offer. If you overpay, you are only setting yourself up to lose money if you decide to sell sooner rather than later. And worse yet, you may be stuck in a home because you can’t pay it off when it does become time to sell.
2. Don’t forget expenses:
If you are buying a home that needs repairs or updating, then you will need to figure these costs into your budget. Are they major expenses that need to be fixed right away, or are they minor, such as painting or replacing a faucet? If you move into a house and then can’t afford to make any improvements, you may find yourself experiencing a bit of buyer’s remorse.
3. Don’t ignore your budget:
Bidding wars often cause excitement between buyers and certainly everyone wants to win, but don’t let that person be you if you can’t afford it. Hopefully, you have a pre-approved loan from your lender. If not, then get one. This will help you stick to you budget. But even if you are headed to the higher end of your pre-approval loan, then take a step back. Your own personal thoughts about your budget are usually more accurate than a banks, so if you are feeling just even a little bit hesitant, then it’s time to slow down and reconsider. Remember, there are plenty of homes out there.
5. Don’t make it a game:
Yes, a bidding war is a game and as I mentioned above, it can cause excitement as well as competition between two buyers. Don’t offer a number based on what you THINK the other person will offer. Instead, make your first offer your best offer because you may only get one opportunity. If a seller comes back and asks everyone to increase their offer, don’t, because you have already given your best price and you don’t know that the other buyer will increase their offer or what their original offer even was! There is a chance you already submitted the winning bid. So I always recommend that in this type of situation, you don’t mess around and give them your best offer first.
6. Remember the appraisal:
Quite simply, a bank won’t loan you more than what a home is worth. If an appraiser comes back and says the house you just offered $300,000 for is worth only $250,000, the bank isn’t going to loan you the extra $50k. Your lender will only loan you what it appraises for. So if the appraisal comes back lower, then you will have to come up with the difference in cash.
7. Keep your emotions at bay:
Yes, I know, this is easier said than done. Buyers who find a home that they absolutely love, often feel they must go to all kinds of extremes in order to be the successful bidder. This is where the brain hasn’t quite caught up with the heart, or the emotional aspect of purchasing a home. Already, the buyer is imaging their first holiday in the home, cooking great meals in the kitchen and maybe planting a garden. As hard as it is though, a buyer really needs to push these thoughts aside and think, rather than feel. Again, if you buy a home using your heart, then you are setting yourself up for a huge reality check when you see the monthly expenses you agreed to. Buyer’s remorse? Yes, this is usually when it hits.
So again, if you are involved in a bidding war, study the comps, average in any costs you will need to make for repairs or updating, get pre approved, refuse to play games and don’t go over your budget. And one more time: do your best to keep your emotions at bay.