1. When it comes to deposits, size matters – When making an offer on a house or condo, it’s customary in Toronto to provide a 5% deposit (paid to the listing brokerage within 24 hours of your offer being accepted and held in trust until closing when it forms part of your downpayment). If you really want to show the Seller that you’re serious and that you’re financially able to buy the property, a big deposit can go a long way. Smaller than average deposits signal to the Seller that you don’t have much skin in the game – and in a bidding war, a deposit over 5% can sometimes win you the house. If you’re in the market for a home, make sure your deposit money is liquid or that you have access to a credit line. [Related: All About Deposits]
2. Reconsider your lowball offer – While most people assume a lowball offer is one that’s significantly below asking price, a lowball is actually an offer that’s significantly below market value – and asking price and market value are not always the same. I’ve made solid offers that were 60K below asking on overpriced properties that weren’t lowball offers. A lowball is coming in 60K below asking on a property that priced accurately. Lowball offers generally backfire in a Seller’s market for a few reasons:
- Sellers know they can get fair market value for their homes.
- Lowballs are generally indicative of an uneducated Buyer or an opportunist – neither of which endears the Buyer to the Seller.
- Lowball offers encourage Sellers (and their agents) to hunt for another offer, thus putting the lowballer in a competitive situation. I’ve seen more than one lowballer end up paying more for a property because they triggered a bidding war. Bad strategy can cost you tens of thousands of dollars.
3. Get your ducks in a row – Having your financing in place and conducting a home inspection before you submit an offer allows you to submit a virtually risk-free offer to the Seller. In bidding wars, this is essential – no Seller will walk away from 4 other offers in the hopes that you get financing and are happy with a home inspection. Outside of a bidding war, an offer with few or no conditions will often be accepted at a lower price than the Seller would want if he also has to accept the risk that you might change your mind.
4. Details, details, details – Words of warning to those of you working with inexperienced agents: Sellers are more likely to accept offers that are error-free, where every initial is initialled and every detail has been thought through. Sloppy offers signal to the Seller that the agent doesn’t know what they’re doing and are a red flag to future issues and lawsuits. I would guesstimate that 40% of the offers I receive have errors – sloppy ones – and that has absolutely cost some Buyers the home of their dreams. I’ve received offers with no signatures, offers with the wrong address or legal information and offers with incomplete conditions. This is scary stuff. This is a legal document that you’re on the hook for – if you don’t trust your agent, have the offer reviewed by a lawyer.
5. If you’re in a bidding war, be in it to win it. Don’t expect that you’ll get a second chance and go in at a price lower than what you’re prepared to pay – lead with your best. Have your deposit cheque in hand. Be nearby in case of last-minute changes. When in doubt, we turn to this video:
6. Relationships matter – Getting the house you want doesn’t mean you have to negotiate in a mean-spirited way. In fact, you’re more likely to get the house you want at a fair price by keeping things unemotional and professional. Top REALTORS know how to negotiate. Weak REALTORS think that negotiating means bullying – but that rarely works. I saw a Toronto agent give this negotiating advice online this week: “Always negotiate and drain them out of every penny for your client.” I can’t even begin to tell you the wrong-thinking that went into that statement. Anyone who knows us considers us shrewd negotiators – but we’re always respectful. We also recognize the importance of building positive relationships with other REALTORS for the good of our clients. More than a few bidding wars have been won on the strength of our relationship with the other side and not on our offer.