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How to survive a bidding war

Gail Johnson
An existing home for sale is seen in Silver Spring, Maryland February 21, 2014. REUTERS/Gary Cameron

With springtime almost here and for sale signs popping up on neighbourhood lawns, house-hunting Canadians are gearing up for battle. More are willing to enter a bidding war, according to a recent Bank of Montreal survey.

The poll found that 34 per cent of Canadians will take the gloves off, with the highest rates for major cities being in Toronto, at 44 per cent, and Vancouver, at 41 per cent.

To ensure you’re not getting gouged but not losing out either, it helps to have savvy strategies in place before signing an offer that’s well over the asking price.

Know when the fight is on

How can you tell if your dream home is in the middle of a bidding war anyway? Price is a good indicator, says Sotheby’s International Realty Canada representative Suzanne Callaghan in Vancouver.

“The listing price will show good value for the property and neighbourhood,” she says. “The list price is usually set at or just below market value.

“Often but not always, the listing agent will specify a date for offer presentation and hand out copies of the Property Disclosure Statement and property title at the open house, which is often very busy,” she adds.

Toronto real-estate lawyer Mark Weisleder suggests using an agent who knows the details of a particular neighbourhood and comparable sold listings.

“Use a local real-estate agent who knows what the house is worth so you’re not fooled by sellers who deliberately underlist their property to generate many offers,” he says.

Keep it simple

Come to the table with your “best and cleanest” offer, Callaghan says.

“Best and cleanest means make the terms as agreeable to both parties as possible, have as few subjects as possible without compromising yourself, and offer your best market price,” she says. “If you can, take care of any possible subjects before you write.”

Never forgo an inspection — just time it right

“Make sure you do a home inspection before you make a bid, even if you pay for the inspection and not have your offer accepted,” Weisleder says. “This way you can safely make an offer without any home inspection condition.”

Consider how much is too much over the asking price

There’s no black-and-white answer when it comes to actual numbers, of course; a price depends on the current market, the property’s location, the home itself, and, most importantly, the buyer’s comfort level.

“Paying too much for one buyer may be acceptable to another,” Callaghan says. “It’s a personal choice based on finances and trade-offs. If you’re concerned that paying that price is going to make you lose sleep, it’s too much over the asking price.”

Have your agent present the offer to the sellers in person

“Quite often, the sellers want to know who is buying their home,” Callaghan says. “The seller is emotionally attached to the home. The seller wants to know that the buyer is going to love and care for their home and get along with the neighbours. It’s not always just about money.”

Know when to walk away

“A buyer should decide their ceiling price before the offer is presented,” Callaghan says. “This ensures you’re leading with your head and not getting caught up in the competitive or emotional aspects of a bidding war.

Weisleder suggests walking away before too many parties get involved too.

“Do not participate if there are more than 5 offers,” he says. “If you win, you will likely seriously overpay as a result of the exuberance of the other bidders.”