Occasionally, a real estate sale turns into a veritable competition between buyers vying for the same property. The result: the seller receives several promises to purchase all at once.
While this can be a stressful situation, it’s important that you understand the process, listen to your broker’s advice, and avoid accepting conditions that might negatively impact your personal or financial situation.
What Constitutes a Multiple Offer Situation?
Such a situation arises when a seller receives more than one promise to purchase for their property within a short period of time. When this happens, the seller has two options:
- Accept what they deem the best offer.
- Submit a counter-offer to a specific buyer and negotiate until a deal is reached.
The Buyer’s Options
While ultimately, it’s up to the seller to decide which offer to accept, the buyer has a measure of power when they learn that they’re competing with other buyers. They can
- stick to their initial offer; or
improve their offer (see section How to Make Your Offer More Appealing Without Weakening Your Position? below)
The seller doesn’t always choose the highest-priced offer. They may prefer an offer with more favourable conditions (such as pre-approved financing) or go with a buyer they’ve taken a liking to, which is quite common!
Real estate broker
Don’t Accept Conditions That Could Hurt Your Interests
An attentive broker will keep you focused and objective and help you make an informed decision. Under pressure, some buyers may be tempted to remove important protections from their offer to secure their dream home.
A Few Common Errors to Avoid
- Removing the pre-purchase inspection clause: Although this may convince the seller to choose your offer, it puts you at huge risk if hidden defects are discovered.
- Making an offer beyond your means: Overbidding can lead to financing problems and burdensome monthly payments.
- Ignoring the property’s true value: You may be tempted to offer more than the property’s actual value. Even if you’re pre-approved for that amount, your financial institution may refuse to lend you the money if it considers the purchase price excessive.
How to Make Your Offer More Appealing Without Weakening Your Position?
If you wish to increase your chances of winning a bidding war without compromising your quality of life, consider the following strategies:
- Offer a generous deposit: This demonstrates your seriousness to the seller. The amount will then be put towards the downpayment if you proceed with the purchase (or refunded if you don’t). Thus you, the buyer, run no risk.
A deposit is really an excellent idea! Submitting a promise to purchase accompanied by a $10,000 cheque, for example, reassures the buyer.
Real estate broker
- Present a firm mortgage pre-approval: Did you know that if the buyer’s financing falls through, despite the seller having already accepted the promise to purchase, the sale will automatically be cancelled? Having guaranteed mortgage pre-approval will help the buyer feel more confident about your offer and may well tip the scales in your favour.
- Reduce the number of suspensive clauses without foregoing essential protections: Without eliminating the inspection, you can review other conditions, such as inclusions (furniture) or the moving date. Your broker will advise you!
- Writing a letter to the sellers explaining why you want to buy the house and demonstrating your financial reliability could give you an edge.
Limitations
You must equally understand that although your broker has your best interests at heart, they’re subject to professional restrictions and obligations in multiple offer situations. These serve to protect both buyers and sellers and ensure the process proceeds in a transparent manner.
Competing with multiple offers can be stressful for a buyer, but it’s important to keep a cool head and listen to your broker’s advice to avoid any regrettable mistakes.
