How to Win a Bidding War: Condo Edition (Updated 2024)

Plan B?

Bidding wars aren’t just for houses-they are common with condos too. 

If you’re looking to buy a condo in a hot market, you’ll need to arm yourself with the knowledge – and wherewithal – to come out on top. Here’s our best advice:

Price

In most cases, the number one thing a Seller cares about is the price. So how do you know how much to offer in a bidding war? In helping you decide, your real estate agent will look at a few things:

1. Recent sales in the building – the good thing about condos, is that there are usually multiple units with the same layout that have sold in the past. Your agent will adjust those prices for differences in height, view, finishes and size, and calculate a per square foot cost to help you understand the value of the condo.
2. Recent sales in nearby buildings – In a fast-moving market, sales from even a few months ago may not tell the story of what’s happening today. If there are no recent sales in the building you want to buy in, your agent will search in similar buildings nearby to see what’s happening with prices.
3. Other similar properties for sale (i.e., the competition) – What are your other options if you don’t buy this one? How do they compare? How often do units like this one come up for sale?

The thing about looking at past sales to determine value, though, is that those sales happened in the past. In a market where prices are appreciating, the next sale will always sell higher than the last sale – the question is, how much higher? 

The challenge with winning a bidding war for a condo is that the math that all of the Buyers and their agents are doing is virtually the same. While houses in Toronto are unique to each other and hard to compare, condos are not. So if 7 Buyers do the same math and come up with the same number, who wins?

This is the point where you need to do some soul-searching:

• What is winning this bidding war worth to you? Only you can determine what buying this particular condo at this particular time is worth to you. Is it worth $2,000 more? $5,000 more? $10,000 more? $50,000 more?

• What happens next? If you don’t win this condo, how much will you have to pay to get the next one?

Pro tip: the price of the next condo will be based on the price you weren’t prepared to pay for this one.

A Caution About Bank Appraisals

Banks commonly perform an appraisal before advancing you a mortgage (usually a week or two before closing). The bank wants to make sure that you haven’t overpaid for a property (especially if you were in a bidding war). If you have overpaid, they want YOU to take on that additional risk instead of THEM.

Scenario:

• A condo is listed at $699,000.
• A comparable analysis in the building indicates the value is $750,000.
• Eight buyers bid on the condo.
• Your offer of $760,000 is accepted by the seller.
• The bank appraises the condo at $740,000.

What happens now? The bank will only lend you money at a price of $740,000, so you’ll need to come up with the extra $20,000 on your own. How do you do that?

• Find an additional $20,000 to put down on the condo. Bank of Mom and Dad? Withdraw some RRSP’s? Sell some stocks?
• Reduce the percentage of your downpayment. If you had a 20% downpayment, you could take $20,000 of that to make up the appraisal shortfall, leaving you with a smaller downpayment. Note: you’ll need to pay CMHC insurance if your downpayment is less than 20%, so you will incur some extra costs.
• If your intended downpayment was 5%, you’re in trouble. When you reduce that by the appraisal shortfall, you’re left with a downpayment of less than 5% and will no longer qualify for a mortgage.

There are other options if you find yourself in this situation…a good real estate agent and mortgage lender can guide you through this most unpleasant situation.

Related: All About Bank Appraisals

Conditions

If you’re in a bidding war for a condo, the Seller will likely expect a firm offer – meaning they want an offer you can’t back out of. In a Buyer’s market, it’s normal to make an offer on a condo with conditions – 5 days to get your financing in place (the financing condition); 3 days to have the status certificate reviewed by your lawyer (Related: the Status Review Condition). But in a Seller’s market, Sellers don’t want to take the risk of accepting a conditional offer. With multiple other Buyers wanting to buy their condo, they’ll almost always take an offer that is firm.

Fear not! This doesn’t mean you have to take crazy risks and cross your fingers that you’ll get financing or that the status certificate won’t be full of lawsuits and special assessments. It just means you have to do your due diligence before the offer. Here’s how you do it:

1. Get your financing in place before you make the offer. It’s not enough to be pre-approved by a bank for a mortgage. You need your lender to pre-approve you for THAT particular property at THAT particular price that you plan to offer. Good lenders in Toronto should be able to give you comfort about going into an offer without a financing condition (though recognize it makes them super nervous).
2. Have the status certificate reviewed by a lawyer before the offer. The Status Certificate contains really important information about the financial and legal health of the building you will own, and not having an expert review the document before committing to purchase it is super risky.
3. Should you get a condo inspection? While it’s not commonplace to get a home inspection on a condo in Toronto, there are times when it’s important to do it. A condo inspector won’t explore the building foundation, plumbing or electrical, but if you’re buying in an older building or one where you own important equipment (for example, the furnace), you may want to consider getting one. And you guessed it: you’ll need to this before you make the offer.

Related: Should I Get a Condo Inspection?

Deposit

If you’re not in a bidding war, you’ll need to provide a deposit (usually 5% of the purchase price in Toronto), within 24 hours of your offer being accepted. But to be competitive in a bidding war, you’ll want to bring your A-Game and have your deposit ready with the offer. If offers are happening via email, your agent can send a copy of the bank draft with the offer and deliver it after your offer has been accepted. 

Related: All About Deposits

Pro-tip: Make sure your deposit money isn’t stuck in an RRSP or a virtual bank. No Seller will wait three days for your money to arrive. 

Closing Date

If you’re bidding on a high-demand condo, the Seller is in charge. It sucks, but it’s reality. To be competitive, you’ll likely need to meet their expectations about the closing date (or, pay more money to make it worth it for them).

For example: the Seller wants to close in 30 days. You’re in a rental and want to close in 60 days. You can either:

1. Give the Seller their 30-day closing date and accept that you’re losing a month’s rent; or
2. Offer enough $$$$ more than the next offer to make it worth the Seller waiting to close for an extra month. But be careful….you may need to offer $5,000 or $10,000 more to make it worth it for them.

Strategy and Reputation

There’s often more to winning a bidding war for a condo than having the highest and best offer…and that’s where strategy and relationships come in. Make sure you’re working with an experienced agent who understands the complexities and the current situation in the condo market…and one who has a good reputation with other realtors.

I can’t reveal the BREL team strategy secrets here…they are SECRETS, after all. But if you’re looking to partner with an agent who knows how to win a condo bidding war – while protecting you and your money – get in touch!