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  • Bidding wars: How to compete in the hot housing market

    Author: Diana Olick Date: January 2, 2017

    A shortage of housing listings in Metro Vancouver has officially created a seller’s market in the city, sparking bidding wars and home sales hundreds of thousands of dollars over the asking price. So how does the average buyer compete in this hot market?

    1. Get your financial house in order—and get as much cash as you can carry

    Get pre-approved for a loan. Today's mortgage market is still relatively tight, and home sellers are leery of loans that might not be set in stone. If you can, bring cash to the table. Sellers are worried about appraisals coming in low and loans not closing, so be ready to cover the difference with cash.  

    2. Come in fast and strong

    Be the first offer, and don't insult. Nothing turns a seller off more than someone undervaluing their prized possession. Come in either at or just slightly below asking, so they know you're serious. 

    3. Escalation clause

    This is an amount of money the buyer agrees to increase his/her offer, if there are other bids. So let's say the purchase price of the home is $400,000, but you expect it could go as high as $450,000. Put in an escalation clause saying you are willing to go as high as $460,000 if you are. Make sure, however, that the clause also says the seller can only take the winning bid up to a level just above competing offers. In other words, if your competitors only go as high as $430,000, the seller can't expect you to pay $460,000, only, say, $431,000. 

    4. Preinspection

    Yes, this will cost you a few hundred dollars that may not come back to you, but yes, it can help in a supertight market. Ask to do a preinspection before submitting an offer. 

    5. Show the love

    If you love, love, love the house, then let the seller know that, either directly or through your real estate agent. Don't be afraid to write a letter, send a picture of your kids and be specific.

     6. Be smart, not sappy

    Buying a home is one of the most emotional things you will ever do. That said, keep it to yourself. Make sure you've fully researched the market: look at the most recent comparable sales and compare prices to a year ago, visit the local school, have coffee at the closest Starbucks and chat with the neighbors. See if there is a local listing service and scroll through recent posts. Then don't let your emotions steal your wallet. Don't overpay because you get all wrapped up in the heat of the competition. 

    Bidding wars

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Author : Diana Olick