Learning that you are in a multiple offer situation can be discouraging. But it’s not dramatic, particularly if you have reviewed all the possible strategies in advance.
1) Obtain pre-mortgage authorization A pre-authorization letter will reassure the seller of your financial capacity to purchase. You’re wasting your time if you don’t have one.
2) Budget The pre-authorization letter helps determine your budget for this purchase. If you want to be able to outbid, target properties priced slightly below your limit. Be disciplined about price. You will hear about extreme cases ($100,000 more than the asking price). But in most cases it’s more like $10,000 to $30,000 more than the asking price. This letter allows you to protect yourself against a rate increase, because you are offered a rate that is valid for 120 days.
3) High down payment Include in your offer the maximum down payment you can make. The seller will be tempted to put aside a buyer who is only able to put down the minimum required. After your offer is accepted and your financing is completed, you can reduce the amount of your down payment.
4) Be flexible about conditions The seller will of course be attracted to the offers with the highest prices. But it will also take into account the conditions of the offer. If possible, include few conditions. Particularly for an owner-occupier, the date of occupancy and the date of sale are often very important. Respect them. There is also the option of not requiring an inspection. This is a risky decision, but one that can significantly increase the probability of winning. One possibility is to require an inspection, but forgo asking for a price reduction afterwards. It is crucial to discuss this with your real estate broker before making a decision. It is possible to avoid a financing condition by purchasing cash. For this, you obtain a private loan for a short period.
5) Act quickly Attractive properties sell quickly. Visits often take place in the weekend following publication of the descriptive sheet on Centris. Visit and make an offer quickly reduces the possibility of other offers.
6) Be represented by a competent real estate broker The real estate broker should help you decide the price to offer. The broker has access to statistics on overbidding sales. He has experienced several multiple offers and he is more emotionally detached than you. This broker will establish an excellent relationship with the seller’s broker and will try to obtain useful information, for example, what is important to the seller: prices, deadlines, etc.
7) Even if you are not chosen, all is not lost It is not uncommon to see an accepted offer lose the race halfway through: financing problem, inspection problem or, even, greater down payment required by the financial institution due to the high price. Ask your broker to try to have your offer accepted in second place if it is interesting for the seller. During the waiting period, you will not be able to make an offer to purchase another property.
8) Avoid multiple offers A property that requires a lot of renovations, or that is located in a less desirable area, is less subject to multiple offers. If you are good at renovations or are open to investing, this may be a good strategy for you.
