Pricing strategies intended to garner multiple offers are not well received by many Oakville agents. This probably explains why we don't see near the same level of bidding wars as Toronto where they are commonplace. This said, Oakville has been in a competitive sellers market for many years now which often makes the dreaded bidding war simply unavoidable.
As a buyer you need to adapt to the reality of the highly competitive Oakville market. Homes that represent good value, sell very quickly, often within hours. The absolute best strategy to deal with a bidding war is to avoid it altogether. Because it is regularly a race to secure a deal before other buyers have a chance to view the home, the faster you view a home and place an offer, the better chance you have of dodging multiple offers. In order to be able to make a quick decision, I highly recommend perspective buyers look at homes in person BEFORE they are ready to buy. This gives you a chance to become acquainted with Oakville's neighbourhoods and home values so that you are able to make an educated decision quickly when you are in a position to buy.
There are however times when avoiding a bidding war simply isn't an option. In these cases, here's what you can expect and how best to deal with the situation:
There are traditionally two ways you end up in a bidding war. The first is a home strategically priced to wage a war. Typically the seller lists the home under market value and refuses to look at offers until a specific date to encourage more buyers to view the home and place an offer. In Toronto, this is commonplace. It is also commonplace for sellers to list $100,000+ below market value. In Oakville, this is much less likely however, many sellers will list at or slightly below what they hope to get and hold back offers for 2-10 days.
In this situation, I always tell my clients in advance so they can decide if they still want to see the property. Most will but I've had some clients refuse to see anything positioned for competition. If you love the home, you need to be prepared to place an offer only if you are serious about buying the home. |f you decide to throw in a low ball offer "just to see if you'll get a deal" you risk the chance that you'll inadvertently push up the market value of the area. Odds are the sale price will be higher if there are more bids. This in turn makes it harder to get a deal on the next home you bid on as the first home is often used as a comparable.
Many listing agents will tell buyers to place an offer just to see what will happen. They use the logic that you can't win what you don't try. This is baloney. Of course listing agents want you to place an offer. They know that even low ball offers can help drive up the sale price of a home. This is another reason buyers really should employ their own buyers agent but that is a topic for another blog post altogether...
Buyers who are only interested in "low balling" really shouldn't be placing an offer for another reason. From experience these buyers typically don't love the home they are trying to buy. I'm in full support of getting a good deal but if your only goal is to get a deal than I think you need to ask yourself why you feel so indifferent about the home. Over the years I have learned that people typically fall in love with the home they eventually buy right away. When they see something they love, they know right away and don't struggle with feelings of indifference. Buyers who debate low balling are usually thankful afterwards they didn't.
The second bidding war situation is when a home is positioned at perceived market value and still receives multiple offers. This is very common in Oakville. This usually happens to homes that meet a wide variety of buyer demands (popular price point, good school catchment, coveted location, etc). If you are looking for a newer townhome in the $400,000-$600,000 range or a detached two car garage, 4 bedroom home for under $900,000, get ready to put your running shoes on and get out to see homes as soon as they hit the market. Sometimes waiting even 12 hours is too late. As a rule of thumb, if you see a home and fall in love with it, chances are someone else will too. The longer you wait to place an offer, the higher likelihood you will be faced with competing offers.
I've decided to go for it and place an offer knowing I am competing with other offers. What happens now?
This is where you need to erase the list price of the property from your brain. I will help you understand the home's estimated market value and then we will discuss the home's personal value to you. Once this is determined, we will strategize how to price your offer. Many people think there is a magic equation you should use based on the number of competing bids (ie: offer $10,000 above list price for 1 competing bid, $20,000 above for 2 bids, etc). This logic has no merit. Of course a home is likely to sell closer to list price if there are 2 bids vs 8 however you need to know what the home is worth to YOU first. The strategy of your offer price and the value of the home are two separate components. The value of the home to you does not change. What you actually buy the home for can however be either at or below this number based on negotiations and your pricing strategy.
We then discuss the value of conditions (usually home inspection and financing conditions), the likelihood of other buyers waiving this condition and whether or not this is something you want to include. Waiving conditions is strictly a personal decision. When in multiple offers, there is a higher chance that one or more buyers will remove conditions to make their offer stronger. The person with fewer conditions doesn't automatically win the offer and the person with the highest offer price doesn't necessarily either. It really comes down to the total strength of the offer, your ability to meet the sellers ideal closing date and your agent's negotiating skills.
Lastly, you need to decide how comfortable you are with winning the bid. I always tell clients to be prepared for the emotional outcome of bidding wars. If you win, you will likely feel like you overpaid (because you presumably were willing to pay more than most other buyers) and disappointed in the time and energy seemingly wasted if you lose. You really need to eradicate the notion that you can only get a good deal if you pay "x" percentage below the list price. The percentage of list price you pay matters very little. If an $800,000 home is listed for $775,000 but sells for $795,000 it is still a better deal than if it is listed for $850,000 and sells for $805,000 even though most people feel they got a better deal in the second scenario. If you ask any of your friends about their personal bidding war experiences you are sure to hear stories of how emotional it can be. Buyers can be completely unpredictable so the best way to "win" a bidding war is to know how much the home is worth to you and put together a strategic offer from there. For more information on how to determine a home's value, click here.
The home buying experiencing can be exhausting, especially when bidding wars are involved. Bottom line is bidding wars are inevitable. The best way to handle them is to view homes as soon as they come on the market, only place bids on homes you love, develop an unwavering, comprehensive understanding of the value of the home and prepare yourself mentally for the process and its outcomes. Once you are in your new home, the number of people you beat out for it matters very little.
If you are thinking of moving to Oakville, I would love to help you buy your dream home. I can be reached at 905.484.5162 and firstname.lastname@example.org.
Happy house hunting!