What’s the deal with Multiple Offers?
The Fall Real Estate market is in full swing, and we’ve seen a few East Van Character Houses sell after multiple offers. This isn’t the case for every property, the not so good listings are sitting stagnant (i.e. small house needing a reno, located in the Bog in East Van, small lot and/or too far from Main St), while the good listings are getting multiple offers. (i.e. good lots, close to Main St, 3 bedrooms up, renovated and/or a mortgage helper). Buyers want something specific, and they’re willing to wait until it comes on the market and make their best offer in order to get it. Good for Sellers, not so good for Buyers.
We experienced a situation recently with one of our listings – an original East Van Character House West Of Main St that still had original woodwork, solid fir floors, huge South facing backyard on the lane and it was ripe for a renovation. The open houses were very busy and everyone was told we would be looking at offers Monday evening. Three interested groups had an inspection done on the house Monday morning (so that they wouldn’t have to have an “inspection” clause in their offer). We received 5 offers, and the highest bid (which was over-asking) was the winner.
What is a Multiple Offer Situation?
A Multiple Offer Situation is when a Seller receives multiple offers at one time, giving the Seller the chance to compare offers and forcing Buyers to submit their best offer so as to not lose the Sale to someone else who also wants it. Since most offers for purchase are open for a day or two (to allow the Seller time to consider the offer and respond), there is always a chance that another Buyer can swoop in and make an offer. The Seller’s realtor is obligated to let every Buyer know that an active offer has been received – this allows Buyers to submit their highest and best offer (i.e. highest price they’re willing to pay and with the fewest number of subjects). When a Seller has multiple offers on the table, they will go through every offer and either accept one, deny them all, or go back to each Buyer and ask for a better offer. The Seller’s Realtor isn’t allowed to tell the Buyers the value of the other offers, but they can say if there are higher offers. Eventually, the best offer becomes the winning bid.
The question for the Buyer then becomes, how much are you willing to pay for this property? As your realtor, I would never suggest you pay $1.2-million for a house in East Van that’s only worth $900k. We have to consider fair market value, possible resale value, the strain on your finances and how happy you’ll be with this decision.
Keep in mind that that was an extreme example, great homes are usually priced with this in mind, so Buyers don’t typically go to high over list price in their offers (though it definitely happens). Usually, Buyers have to accept the Seller’s ideal completion and possession dates (Sellers are in control, so why would they accept dates that don’t work for them?). Buyers also have to limit or forgo subject clauses to make their offer as “clean” as possible. Many Buyers try to have the inspection done before presenting their offer (if the Seller allows this) so that they know the condition of the house before they write their offer. Many people increase their deposit amount to strengthen their offer. Finally, many people will remove their financing clause if they are certain their mortgage will be approved (only do this if you are certain – especially in the current lending environment).
Know Your Ceiling Price
Knowledge is key when there are Multiple Offers. Know your ceiling price before you jump into Multiple Offers (and any other offer for that matter). Emotions are high during negotiations, so knowing your ceiling price will help prevent you from going over your budget in order to “win”.
At the end of the day, if you didn’t have the successful bid in multiple offers, just remember that there’s less competition now that this person has found their new house, and hopefully less of a chance that you’ll find yourself in a Multiple Offer Situation again. New properties are always hitting the market, so keep your head high and stay in tune with what’s happening in East Van Real Estate.
