Making an offer on a home during the current real estate market can feel overwhelming. If it’s not a multiple bid situation, it’s outlandish offers well over market value or people willing to drop all conditions before signing their mortgage on a home. Therefore, you need to arm yourselves with the right tools to manage buying a home for these reasons and more.
Before you start your house hunting and start putting down offers, you should have a few things to make the experience more seamless, including a solid real estate agent, a secure financial situation, and a decent understanding of the current real estate market.
How do you know if it’s a seller’s market or a buyer’s market?
In a perfect world, you’ll be buying in a buyer’s market. But, unfortunately, that doesn’t always happen. Real estate operates both seasonally and in a cycle.
Real estate operates in a cycle with four different phases.
- Phase one is recovery when the market has a limited supply and no new construction.
- Phase two is expansion when there is a limited supply, but new construction begins.
- Phase three is hyper-supply, increasing vacancy and more recent construction.
- Phase four is a recession, with a lot of supply and continual building.
Given that Canada has been in a housing bubble for 26 years, where prices have continued to rise at no sign of slowing down, we are in the expansion phase — and have been for some time. Because this means that Canadians are confident in their real estate investments and are continuing to buy property, we’re experiencing a seller’s market.
When it comes to seasonal real estate cycles, most homebuyers in Canada buy a property during warmer months. Therefore, spring and summer are always more competitive than fall and winter. After all, no one wants to move house in the middle of a snowstorm — and homes don’t always show well when they’re covered in icicles, and you can’t see the quality of the landscaping.
What are some strategies you can use to put in a winning bid on your dream home?
So, now that you know you’ll likely be buying a home in a challenging market unless you’re planning to purchase outside of a major city with less demand, here are some strategies to try to make your bid the winning offer.
#1. Adjust the conditions
One thing you can do as a buyer is come to the table with flexible conditions. Perhaps the seller wants a period of fast (or slow) possession. If you’re able to complete the terms and take possession within one month — or three months — make sure your real estate agent knows that you’re willing to adjust for the seller.
Other options include dropping contingencies — meaning you may pay more than the home’s appraised value — or waiving a home inspection. Although these are options, it doesn’t mean they’re the smartest or safest option for you. Keep in mind, though, dropping contingencies and waiving a home inspection make you much more liable to unknowns as a homeowner and could cost you a lot of money.
#2. Get personal with an offer letter
In some states, like Oregon, personal offer letters to sellers are soon to be banned as a strategy to win a bid on a home. That proves how powerful a persuasive and personal home offer letter can be. Writing a letter that includes personal anecdotes, proves you’re a responsible buyer and shows the seller why you love their property is an intelligent way to help your bid stand out.
When writing a home offer letter like this, just remember to keep it concise and avoid getting too personal. This letter allows you to give a straight-to-the-point message that also clarifies where you’re at financially, putting the seller at ease if they choose your offer over another.
#3. Prove you’re fiscally responsible
Speaking of proving your financial security, one of the best ways to score the winning bid on your dream home is to do one of two things: first off, ensure you have mortgage pre-approval before putting in any offers on a home. This gives the seller confidence that the deal will go through.
Second, if you can, be prepared to offer a larger down payment or put in an all-cash offer if you have the means. However, it may not be realistic for everyone. But sellers love to hear that they’ll have all of the money for their property upfront.
#4. Increase your offer
The best way to put in a winning offer is to, of course, put in the highest bid. Of course, the highest bid won’t always win, but we all know that money talks. Just remember that if you increase your offer, you’re never exceeding your maximum budget. Better yet, whatever number works for your actual budget, which usually doesn’t align with your maximum affordability.
Don’t admit defeat after a few losses
Buying a home in today’s market can at times feel hopeless. For that reason, it’s essential to remind yourself that patience will be what matters during a difficult market. Although it might feel like you’re making offer after offer, it’s best to stay strong and not compromise on your wants and needs in a home to risk buying a home that isn’t right for you.
One study found that most homeowners in 2021 went to 15 showings and put in five different offers before finally submitting the winning bid. That tells us that even if you have everything in line and are ready to buy a home tomorrow, it doesn’t always mean that you’ll secure the home you thought you would. So practice patience and remind yourself that everything happens for a reason.