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The Multiple Offer Dance
Welp! Crazy "bid-wars" are back in a big way. Well-priced (sometimes underpriced) homes in popular areas of Winnipeg are getting 8, 9,... 13 or more offers on offer date and selling for over $50,000 more than the list price in many cases. While great for sellers, this can be incredibly frustrating for buyers (and their agents), who go through all of the work of searching for a suitable home, finding one they love and feel confident enough to buy, writing an offer, and then finding out that they've been "out-bid" by another offer and heading back to the drawing board to do it all again. Many, many times over.
So let's talk about this a bit. You can write your offer for whatever you like. Decide on a price that is reasonable for the home and that you can afford. This may mean going all the way up to your max budget, but if you really want that house, you should be prepared to go for it. I always tell my buyers to come up with a price in their head that, if it should sell to someone else for even $1,000 more, they won't curse and say "I WOULD'VE PAID THAT!!". If it sells for a bit over what you offered, you have to be comfortable walking away happy that you gave it your absolute best shot. The thing is, in situations like what we're experiencing right now, you may need to look at homes well below your max budget, simply to allow space to negotiate. If your max is $300k, and homes in that price range are selling for $330k-$350k, your offer of $300k might not get you very far. It can be a hard pill to swallow, but finding a great home that you can make your own improvements on and that you can afford can be pretty great!
You can also put conditions on your offer, the most common being home inspections and financing conditions. There are a myriad other conditions you can speak with your agent about writing in, but I'll focus on these two. Home inspections are wonderful things. Good, reputable inspectors (that part is important...) will go through your home with a fine-toothed comb, telling you everything that they can SEE. They cannot damage a home in any way, but if they can see it, poke their head into an attic etc. they'll tell you about it. There may be things that they can't see that could be problematic in the future, but they can only do their best. They give you all of the facts and let you make the decision about whether or not to purchase this home. They will tell you things that should be fixed or looked into, and suggest how to go about getting quotes for it, if it's a big deal etc. If it's a condition of your offer, and the home inspector tells you something that is a deal breaker for you, you can walk away from that purchase and find another home. In multiple offers it can be hard to get your offer to be competitive with a home inspection condition, but you have to decide if you feel comfortable enough about this property to write without one. Two possibilities that can help in this situation are: get a home inspection after you move in. You can no longer run screaming from the home, as you've already bought it at this point, but you'll have a "to-do list" and you'll know what to expect in coming years. You can also request a second showing and home inspection PRIOR to writing your offer. If you're okay with what the inspector tells you (and you have to pay him/her whether you buy the home or not) then write an offer without an inspection condition and away you go!
Financing. SO important. So obviously, getting pre-approved with a mortgage broker should happen before you even start looking for a house. They figure out your budget based on your credit, income, monthly bills you have to pay, needs and wants etc. (Be careful to make sure that you actually ARE pre-approved). If you put a financing condition on your offer, it's giving your broker a few days to find you a lender and, if you're putting down less than 20% - a mortgage insurer, before making the deal final. Even if YOU are approved, the home you wish to purchase might not be. Say you make the best offer, you win the bid-war, and the house is yours. Hooray!!! Say that, to win, you wrote much higher than the list price (still within your budget, of course. Good for you.) Even if you are approved to spend that amount, the lender providing the loan for the mortgage, and/or the mortgage insurance company (usually Canada Mortgage and Housing Corporation or Genworth) might get an appraisal done and find that it's not actually worth what you're supposed to pay. If that happens, and you are unable to acquire financing for that home, you can walk away from that purchase because of your financing condition. If you had removed that condition (possibly in order to win the bid-war) you have now bought that home that you are stuck with, and had better FIND the money to pay for it without a mortgage, or you could risk losing your deposit and some legal fees for backing out, because it wasn't a condition set to protect you in the offer to purchase.
Basically, do what you think is right for you, and what you're comfortable with. Some folks and their agents are removing financing (or other types of conditions), and winning, and that's fine for them. If you're not cool with it - don't do it. It's really important in these situations to make your offer as "pretty" as possible: give the vendors the price they want, the possession date they want, home inspections and financing etc. depending on the home and what the situation and your comfort level is... It's up to you. If you think your offer won't have a chance because it's so close to the list price, you need a certain possession, and you have several conditions, then that's one thing. But, as I believe Wayne Gretzky (and Michael Scott -"The Office"...and my husband, Kyle) say "You miss 100% of the shots that you don't take". It never hurts to throw your hat in the ring if this is a home that you want. If you lose, you'll find something else. Be reasonable, but be true to yourself and comfortable with the choices you make. You have to be happy in your new home. Stuff WILL go wrong - it's Murphy's law. Something will break, or require attention in your new home, and you'll have a few grumbly days. It's important that you're still happy with the home that you've bought, on the terms that you chose, because you can't go back.