Tips to avoid — or win — a bid­ding war

Find­ing, and buy­ing, a house you want in the city you love may be within reach af­ter all

Toronto Star - - MORTGAGES - CAMILLA COR­NELL SPE­CIAL TO THE STAR

With their first child on the way, Dan and Jas­mine Young needed more room than their two-bed­room wes­tend home could pro­vide.

“The baby was due in Jan­uary and we were kind of think­ing that we’d like to be in the house at least a few months be­fore he came to get it ready,” Dan says. So they started their home search in the mid­dle of the sum­mer. The process was de­mor­al­iz­ing. “We prob­a­bly put in six to eight bids,” Dan says. “We were go­ing in with what we thought were de­cent of­fers and get­ting out­bid by $125,000. And as much as you tell your­self not to get in­vested in a home, you start to imag­ine your­self in that place and that neigh­bour­hood.”

In the GTA’s siz­zling hous­ing mar­ket, where bid­ding wars are al­most de rigueur and house prices of­ten far ex­ceed the ask­ing price, the Youngs’ ex­pe­ri­ence is woe­fully com­mon­place.

But they did find a house even­tu­ally. And you can, too. Read on for ad­vice on how to get the house you want with­out break­ing the bank.

Look out­side the box

The Youngs’ real es­tate agent even­tu­ally sug­gested tak­ing a slightly dif­fer­ent ap­proach.

“You’re bid­ding against the same peo­ple every time,” she says.

“Every­body is go­ing af­ter the same thing. So let’s ex­pand be­yond the houses that are just com­ing up on the mar­ket.” She sug­gested look­ing at es­tate sales, as well as homes that had been on the mar­ket a lit­tle longer — per­haps be­cause they needed a lit­tle TLC.

The strat­egy worked. The Youngs made an of­fer on a de­tached house with park­ing and easy sub­way ac­cess that had been lan­guish­ing on the mar­ket for about a month. The prob­lem: it wasn’t up­dated, and the own­ers had al­ready re­jected sev­eral of- fers at or around the ask­ing price.

“They were hold­ing out for a higher bid,” Dan says. In the mean­time, buy­ers had moved on to newer prop­er­ties.

“We of­fered be­low the ask­ing price, based on comps in the area and the amount we fig­ured we’d have to put into the house,” Dan says. The for­mer own­ers ini­tially re­jected the of­fer and “we all walked away.” But about a week later, the Youngs got a call say­ing if they came up a lit­tle on the price, the sell­ers would take it for $60,000 be­low ask­ing. They jumped in with both feet and took pos­ses­sion of the home last De­cem­ber.

The floors need to be done up­stairs and down in their new home, and the up­stairs bath­room needs to be gut­ted. Even the kitchen needs a re­fresh. But it’s theirs.

“Every day we kind of count our lucky stars,” Dan says. “There’s work that needs to be done, but it’s all stuff that can be done later.”

Make a ‘bully bid’

More for­mally known as a pre-emp­tive of­fer, this in­volves sub­mit­ting a bid on a home be­fore the des­ig­nated and planned of­fer day.

“Buy­ers do it be­cause they want that house and they want to have less com­pe­ti­tion,” says Real Es­tate Home­ward agent Col­lette Skelly. “And some­times it’s be­cause they’re go­ing away for a hol­i­day to Florida and they want to put in an of­fer be­fore they go.”

Even in to­day’s hot hous­ing mar­ket, sell­ers some­times ac­cept, “mainly to avoid the in­con­ve­nience of hav­ing open houses,” Skelly says.

“It means they don’t have to keep the house tidy and take the dogs to the ken­nel and the kids won’t have to go to Grandma’s house.”

But, she cau­tions, if a bully bid is to be suc­cess­ful, it had bet­ter match or bet­ter the most re­cent sale price of com­pa­ra­ble homes in the area, be a clean of­fer and be sub­mit­ted soon af­ter the home comes on the mar­ket.

Keep it clean

Con­di­tional sales just don’t cut it when there are plenty of of­fers on the ta­ble. “We knew from sell­ing our other house that when we looked through bids, even if they were the best of­fer, if they were con­di­tional on in­spec­tions they were put to the side,” Young says.

Ditto for of­fers that are con­tin­gent on fi­nanc­ing. “Home­buy­ers def­i­nitely need to get qual­i­fied and know how much they can pay up front,” Skelly says. If you are pre-ap­proved for a mort­gage, the lender has made an ac­tual com­mit­ment (sub­ject to con­di­tions such as a prop­erty val­u­a­tion) to loan you money.

And if pos­si­ble, adds Skelly, ac­cept the seller’s pre­ferred clos­ing date and don’t quib­ble over buy­ers tak­ing light fix­tures or ap­pli­ances when they go. “You don’t want to be ar­gu­ing over things like that,” she says.

Push your bud­get “Our bud­get changed from the be­gin­ning,” ad­mits Young. “We had to take a sec­ond look at our fi­nances and what we could af­ford, es­pe­cially con­sid­er­ing the eq­uity in our other place. We pushed our bud­get as much as we could.” Many buy­ers are in the same boat, Skelly says, “with the way prices are ris­ing every time you wait, it’s an­other $30,000 to $100,000 for a house.”

JON NI­CHOLLS FOR THE TORONTO STAR

Be­fore baby Char­lie ar­rived, Dan and Jas­mine Young snatched up their dream home in need of a lit­tle TLC for $60,000 be­low ask­ing.

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