You have fallen in love with a property and are ready to offer. What does that look like in our current market? Ottawa has had a shockingly busy spring and early summer real estate market, even with COVID looming over our heads, and it has been a competitive one at that. The market we are currently experiencing in Ottawa is what is known as a “Seller’s Market”, meaning that there are very few properties for sale and a large number of Buyers. This lack of inventory compared to the number of eager future home owners usually results in a multiple-offer scenario.
In a more “Balanced Market” (meaning there are plenty of both Buyers and Sellers), a typical home buying experience would include negotiating aspects of the sale such as price, closing date, financing, and a home inspection. There would be an allotted amount of time assigned in the Agreement of Purchase and Sale for you as a buyer to get your mortgage sorted, hire a real estate lawyer, and a home inspector to go in and give their seal of approval.
In a high-stress market like this, choosing the right real estate agent for you is incredibly important. Gone are the days of simply choosing your agent because your cousin used them. Interview a few agents (I'd recommend at least three) agents and make sure that the agent you choose is experienced in a market like this and emotionally invested in you and your purchase. The right agent will guide you through the market and the entire purchasing process with ease.
Especially in times like these, having an agent that pays close attention to the details and respects the listing agents offer and sales process is key to getting your offer in front of the Sellers.
Remember, "there are plenty of fish in the sea." This is true even in a Sellers' market. Be emotionally prepared to lose an offer or two before finally winning. The unfortunate side to this type of market is that there are sometimes buyers who swoop in with an offer way above asking price and blow all other offers out of the water. Other times, you lose the property for a reason that has nothing to do with money.
It can be hard not to get attached to a home, especially when it ticks all “needs” and “wants” boxes, but understand that there will always be another property available that may be even better than the one you just lost out on. There are new listings on the market every day!
This step is a big one, but is usually left for that time period between your offer being accepted and being “firm” (meaning you have fulfilled any conditions stated on the Agreement of Purchase and Sale and the offer is official). This step is actually better to do ahead of house hunting regardless of the type of market. You'll have a much better idea of the price point you are comfortable in. Your lender will answer a lot of questions you may have and get you in the right position to buy your future home.
That stamp of pre-approval from your lender of choice shows sellers you are determined to purchase their home and have done the homework necessary to close.
Being able to put down a deposit above the standard % is a great way to let the sellers know that you are serious about purchasing their property. This money is not on top of the price of the home, rather simply offering a larger amount earlier. It shows that you as a buyer have funds available to complete the purchase.
Make sure that these funds are as liquid as possible so that you can write that deposit cheque or online transfer quickly without having to wait on any third parties.
As I write this, most properties in Ottawa are selling unconditionally. Making an offer without conditions is one of the best ways to get your offer on the table. Going in without conditions on your offer simply means that you have done your homework beforehand and you can confidently make an attractive offer. It should not mean that you're simply making an offer without any kind of due diligence and hoping that things work out.
A "clean" (unconditional offer) is very attractive to the Seller. When a Seller accepts an offer, their home is off the market. If there are conditions, this means that there is a possibility that the sale may fall through if one of these conditions are not met. You can see why it is so attractive to a Seller to accept an offer without conditions.
These are some typical conditions that you might consider leaving out. Do your due diligence before making an offer:
- Financing - Have a good relationship with your lender (use a mortgage broker) and make your offer well within your budget
- Home Inspection - Many homes listed in Ottawa have a pre-inspection that buyers can review. If not, consider paying for a pre-inspection with a home inspector. It can be a tough pill to swallow to pay $500 or more for an inspection and possibly not get the home, but a home inspector can save you thousands in unexpected repairs and give you a realistic picture of the home's conditions. When you consider that clean offer is often thousands of dollars more appealing to a seller than a conditional offer, you're coming out ahead by being prepared here.
- Status Certificate - If you are looking to purchase a condo, a Status Certificate has to be ordered and checked over by your Real Estate Lawyer of choice. Some listing agents have obtained the Status Certificate beforehand and your agent can ask for it ahead of time to get a head start on your offer!
How valuable is a clean offer to a Seller? In my experience working with many buyers and sellers, I've seen Sellers choose unconditional offers over higher conditional offers again and again. Sometimes two identical offers come in and the lack of conditions tips the scales, and other times the Seller leaves substantial amount of money on the table to take the unconditional offer. How much? Typically a clean offer tends to be 1-5% more valuable than a conditional offer, but I've personally seen a seller take a clean offer that was $75,000 less than a competing conditional offer.
Being prepared wins offers.
The highest offer is not always the winner. Sometimes sellers are more concerned with who will continue to care for their beloved home once they have moved. Writing a “Love Letter” is a wonderful way to introduce yourself to a seller and share your plans for their home. Email me for the example of the letter than I won my own home with against a higher bid.
This won't work on all properties. For example, an investor selling off his duplex probably doesn't care that you grew up having ice cream at the shop down the street. However, it rarely ever hurts to include a letter. Just remember that on the other side of every transaction is a human who might want to know who they're working with.
Being kind is free and should be used in abundance throughout the buying process. Selling your home is stressful, even more so now with COVID. Fully respect any rules and communicate in a respectful and kind manner. This will not only make you a more attractive buyer, but also a more attractive future home owner to pass their home on to.
Allowing the seller to choose the closing date will go a long way to helping your offer. Take into consideration what is happening in their lives during the sale and future move. Do they have children in school? Are they buying and selling at the same time?
Listen to my podcast episode "Buying a Home: Offer and Negotiation" to learn more mutliple offer situations and interview with my colleague and friend Gabriel de Varennes of Royal LePage Performance Realty.
I hope these tips have helped you feel more comfortable and confident in a multiple-offer scenario. If you are interested in buying a home or looking to learn more about this process, give me a call! I am always happy to help!