10.22.2021 | Buying A Home

Dealing With Multiple Offer Situations: What Buyers Should Know

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If you’ve kept an eye on our local Toronto real estate market (and most of Canada’s too, for that matter) over the past year or so, you’ll have heard non-stop about how frantic it’s become. With banks and private mortgage lenders handing out comparatively low-interest rates and generous bank loans, it’s never been a better time for a buyer to invest in a new home.

However, among this fleury of activity on the market, there’s also been a sharp rise in competitiveness for homes. There are simply more buyers than there are properties for sale right now, and this overwhelming demand for homes has unbalanced our markets.

As both average home prices and competition between buyers for homes have skyrocketed recently, scenarios like multiple offer situations have become all the more commonplace.

But what is a multiple offer situation and how can you navigate them as a buyer? All that and more in our buyer-specific guide here.

Buying In A Seller’s Market

While multiple offer situations can theoretically arise under almost any type of real estate market climate, the most common time they occur is during what’s known as a seller’s market. A seller’s market happens when buyers’ demand for homes outweighs the current market supply of homes for sale, thus most of the negotiating power shifting in favour of the sellers.

Naturally, when demand is greater than supply in the real estate market, this can lead to a few predictable outcomes. Firstly, it’s simply harder to purchase a home as a buyer. Average sales prices increase, the number of days homes spend on the market decreases, and numbers of active inventory on the market fall steeply downward.

Seller’s markets also foster competition between buyers. As desirable listings will inevitably attract interest and attention from several different parties of eager buyers, things can get complicated when it comes time for buyers to submit offers for a home.

When multiple buyers submit offers at the same time for a home, this is called a multiple offer situation — and as a buyer, this is when real estate transactions can become harder to navigate.

We took a deep dive into seller’s markets on a previous blog post to help our clients get a better understanding of why Toronto’s real estate market has been so frantic recently. Brush up on your market knowledge by reading our blog post, What Is a Seller’s Market? here.

Negotiating Terms And Conditions

During a multiple offer situation, the ultimate decision about which buyers’ bid gets accepted falls in the hands of the seller. Clearly, money will play an important role in this decision, as the offers with the highest sales prices and largest down payments will obviously appeal more to sellers.

However, there are a few more factors sellers take into consideration when reviewing multiple offers. The terms and conditions outlined in a buyer’s proposal contract can be equally as important to a seller as anything else and can make or break a deal for a buyer when competing in a multiple offer situation.

The terms and conditions outlined in a proposed Agreement of Purchase and Sale contract can include any number of stipulations and agreements, and the more conditions a transaction hinges on, the more complicated the transaction becomes for all parties involved.

Want to learn more about what multiple offer situations are like for the other side of the negotiating table? Read our selling-related blog post, Dealing With Multiple Offers: What Sellers Should Know here.

Terms and Conditions You Should Know

Commonly, the success of a buyer’s bid might rely on the completion of conditions including:

  • The home must pass a professional inspection
  • A renovation or refurbishment to a particular area must be completed
  • The buyer must first sell their home for a specific price before the purchase of their new home can be sanctioned

Add in the fact that all terms and conditions in an offer must occur before an agreed-upon date in order for the contract to be considered valid, and things can get even more complicated. For sellers, the more to worry about at this stage, the less appealing an offer sounds. Ideally, they want to sell their home ‘as-is’ and as quickly and easily as possible.

That’s why as a buyer in a multiple offer situation, it can just as beneficial to the success of your offer if you reduce or completely eliminate any contractual terms and conditions for sale as it would be if you offered more money.

Are you currently on the search for your next home? Look through my collection of featured listings below, or get filtered listings matching your specific criteria sent directly to you as soon as they appear.

All About Offer Dates

In highly competitive seller’s markets where multiple offer situations can be expected, sellers will often employ the offer date tactic. Simply put, an offer date is the earliest date and time when a seller will begin to review and consider offers from buyers for their home.

By waiting for a set date to review offers from buyers, sellers are attempting to capture the maximum amount of market exposure for their listing from interested buyers — and, will hopefully (for the sellers) result in a multiple offer situation come that offer date.

Sellers believe that if their listing appears attractive enough to many potential buyers, the added pressure and enthusiasm generated from a predetermined offer date will result in a bidding war between buyers, therefore driving the final sales price of their home upward.

Want to get a snapshot reading of Toronto’s current real estate market by region? Find market stats and data on our How’s The Market? page here.

What About Pre-Emptive Offers?

However, buyers should know that there’s also an alternative route one can pursue when interested in bidding on a listing with an offer date. Buyers can sidestep the offer date request and submit an offer ahead of time too, which is known as a pre-emptive or bully offer. This tactic means a buyer’s offer immediately jumps to the front of the line ahead of all other offers.

Clearly pre-emptive offers directly play against the original wishes of a seller, however, they can be effective in certain scenarios. If a buyer submits a bully offer that far exceeds the financial expectations a seller has for their home, there’s a good chance the offer will be strongly considered. Or, if the pre-emptive offer includes a set of terms and conditions that are appealing to the seller — most probably few or no stipulations — then this might also give the seller reason to choose the pre-emptive offer too.

Have low-interest rates and generous mortgage loans got you determined to enter the market and buy your next home? Find out how we can help you get ready for your next purchase then book a no-obligation consultation with us via the links below

Navigating A Successful Home Purchase

Buying a home in any kind of real estate market isn’t without its challenges, and when you factor in elements like being in a seller’s market, multiple offer scenarios, and set offer dates, buying a home can feel downright overwhelming.

However, a seasoned and qualified Realtor® should have enough knowledge and experience to guide their buyer clients through any type of challenging transaction or negotiation. That’s why the best advice we can give you as a buyer is to seek out the help of a trustworthy Realtor® with expertise in negotiations and navigating challenging markets.

Over the past year or so, our local COVID-affected market has posed challenges to everyone in the real estate industry. However, those Realtors® who continue to regularly help their clients complete transactions and realize their dreams are those who you can look to for advice and guidance through your next home purchase.

Finding an intelligent Realtor® who genuinely wants to help you achieve your own personal ambitions can be challenging in a place like Toronto. Get more advice from us on How To Find the Right Real Estate Agent here.

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