When the supply of a given product is not keeping pace with the demand, this imbalance creates what is known as a “seller’s market”.
Recently a number of factors have converged to contribute to this type of imbalance in the real estate market in Hamilton and surrounding areas. Some of these factors include
- Historically low cost of borrowing
- Changes to qualification criteria for first time buyers, effective July 1 2020
- Very strong demand from out of town buyers who see Hamilton as an affordable alternative
- Lower than normal inventory in the Spring market period due to Covid 19.
Whatever the cause, many buyers are finding themselves having to compete against several other buyers for a given property. Commonly known as “bidding wars”, these competitive situations can be stressful for everyone involved.
So how does the process actually work, what can you do to make your offer stand out from the competition and how can you prepare yourself for an outcome you, as a buyer, can live with?
- How does it work? Put simply, the seller and listing agent decide on a date and time, usually 5-6 days after listing, on which the seller will review any offers that are submitted by interested buyers. Normally, the seller chooses an offer that they feel meets their own expectations with respect to price, closing date and other factors, such as conditions (see below).
- Choose your agent wisely! The competitive process is complicated and full of potential pitfalls! It is imperative that you choose an agent whom you trust, who knows the local market and who has a proven track record of success in a competitive market environment.
- It’s not only about the price! Creating a competitive offer that will grab a seller’s attention is not always only about price. Consider:
– Unconditional? Conditional? Deciding on whether to include conditions in your offer or not takes careful pre-planning and a clear understanding of the implications of making a firm offer. Your mortgage approval must be in place and your lender should know that you are submitting an offer with no financing condition. You should also consider a pre-offer home inspection. Some inspectors offer reduced rates for hour long “mini-inspections” which give the potential buyer peace of mind regarding major mechanical systems like roof, plumbing, wiring and HVAC. Submitting an unconditional offer is not without risk, but an offer that is loaded up with conditions is going to be less attractive to the seller.
– Closing Date: your agent should find out what the seller’s preferred closing date would be and if possible, you as a buyer should try to accommodate them.
– Deposit: consider submitting a certified bank draft for the deposit with the offer, rather than waiting for acceptance. Also, consider increasing the deposit amount from what the seller has requested. This shows you are a serious buyer.
– Whenever possible, as your agent, I ask to present your offer in person to the seller. I find this lends credibility to my client’s offer and I am able to answer questions the seller may have about the offer directly.
- Sometimes it is all about the price! Let’s face it, seeing the big number in black and white is going to grab a seller’s attention, but make sure it’s a number that, win or lose, you can live with. Bear in mind, the list price the seller chooses may be under the market value of the home. Sellers use this strategy to attract attention to the listing, get lots of showings and hopefully, lots of offers on offer day. Bottom line, its your offer and your money and you need to feel comfortable with the outcome. As your agent, I will do my best to give you all the information and guidance you need to make a decision you are happy with.
- You get ONE Chance! Unlike other places, in the Hamilton marketplace it is the accepted practice for the seller to review all submitted offers and choose the one that works best for them. Under normal circumstances, there is no second chance for buyers to “improve” their offer. So put your best foot forward knowing you will likely not be given another chance.