When you make the decision to go house shopping, one of the possible outcomes is an intense bidding war for one or more of the houses on your short list.
Whether the house you covet is located in a desirable area, is close to amenities and schools, or has a layout that’s just perfect for you and your family, you might face some stiff competition from other prospective home buyers. If you table an offer for a house and others decide to do likewise, you could find yourself embroiled in a bidding war as competing parties seek to one-up each other.
Here are some tips on how to handle a bidding war that will provide guidance on know how to deal with this sort of situation if it ever materializes.
Know When to Fold Them
A BMO Home Buying Report that was based on the responses of a couple of thousand Canadian adults shows that it’s important to avoid impulsive behavior. The study showed that the majority of people in Canada grasp that it is better to know what they can afford to spend on a home — and to stick with their budget — rather than to impulsively compete in a bidding war that could end up driving up the price of the house they want. The report also revealed that bidding wars are more likely than not to take place in Calgary, Toronto, and Vancouver.
While engaging in a bidding war could end up burning a hole in your pocket, there are strategies you can take to possibly win a bidding war while also avoiding spending an excess. You can do this by studying the local market to get a feel for the selling prices of comparable homes. That way, you can determine the absolute highest offer you’re willing to make — which may very well be enough to win a bidding war.
Consider Appraisal Value
When mortgage lenders decide how much they’re willing to lend you, they will base their decision on factors that include a professional appraisal of the home you want to buy. If you get into a bidding war that drives up the cost of a home beyond what it’s truly worth, you will ultimately be left to foot the difference on your own since no lender will lend you more than the house is actually worth.
If you want to stand out from the crowd, you need to show sellers that you’re really serious about buying. What this means is that you should demonstrate that you have been pre-approved for a mortgage loan and are, therefore, interested in getting a deal done.
The Law is on Your Side
Fortunately for you, it is now illegal for real estate agents to stage a fake bidding war. What this means is that real estate agents are not allowed to say that an offer for a house has been made unless a signed bid has been sent in to the listing brokerage firm.
With the aforementioned tips at your disposal, you now know how to handle a bidding war. Happy house hunting!