Buying houses is something most people do only a handful of times throughout their lives. Each time, they must become acquainted with the current market and financing rules (watch for an upcoming post on the changes effective January 2018!) and as well as changes to the overall purchase process. Today, I am going to focus on the buying side of the process, as this has been particularly challenging over the past 6 months in Ottawa.
Parts of Ottawa market experiencing Seller's Market conditions
First of all, what is a seller’s market? Simply put, it is a market where the demand for houses exceeds the supply, therefore driving up the competition for the homes that are listed. This often results in three things: multiple competing offers on one listing, higher market value (the price people are willing to pay) and shorter time on market. October 2017 statistics in Ottawa indicate this is the trend, reporting average residential sale price has climbed 7.7% to $425,256 over October 2016, as well as fewer days on market; down 17.7% from 55 to 45 days.
In a seller’s market, multiple offers are quite commonplace. They are great for the seller, but add to the already stressful process of submitting an offer. This is why having a strategy behind your offer is so important. You may be wondering how something like an offer, with standard required elements, can have a strategy. This is where a real estate professional who is representing you, the buyer, earns their dough!
Money doesn’t always talk, but in a seller’s market, it tends to have a pretty loud voice!
In a seller’s market, buyers want to make their offer more attractive than the competition. This can create what is commonly referred to as a ‘bidding war’.
In a seller’s market, money does talk, quite loudly actually, BUT it doesn’t always come down to how much you are willing to pay. But what happens when you don’t have the financial resources to outbid the competition or it’s just not wise to overpay on a particular property?
Here are other ways that other parts of an offer can contribute to an accepted offer:
In some cases, the closing date is more important to a seller than the price they get for the house. Maybe they have to move by a certain date (common in military moves) or they have another house they have an offer on, that requires them to take possession on a certain date. At any rate, don’t discount the importance of this detail. I like to establish a good rapport with the selling agent right from the get-go to find out if possible how much the closing date weighs in their decision making.
Conditions: Not all conditions are created equal!
Certain conditions are quite typical when it comes to an offer. Usually the following 4 are included:
1. Financing – buyers can go back to their financial officer or mortgage broker to ensure their financing is approved to purchase this particular property
2. Inspection – buyers can make the purchase conditional upon an inspection taking place, and that the findings are to be taken at the buyer’s sole discretion.
3. Insurance – the purchase is conditional upon buyer’s securing insurance for this particular property. Financing is also usually contingent upon securing property insurance.
4. Legal review – this is not as regularly included, but again, protects the buyer. It provides the opportunity for the buyer to have their lawyer review the offer to ensure their interests are legally protected. Some people opt to exclude this. Discuss this option with your real estate professional to see if it is right for you.
NOTE: Other standard conditions that may be included apply to rural properties (well/septic inspections) and condominiums (title search to ensure reserve fund is adequate, among other items). Today however, we are focusing on the 4 above that are typically included in all offers.
The strategy behind the conditions creates winning offers
This is when the conditions in the offer come into play. They vary in complexity and circumstances for every single buyer, seller and transaction. Therefore, not all offers are created equal!
This situation is when your real estate professional should step up and provide expert guidance, as well as drawing on other resources like your mortgage broker or financial officer to help determine if, for example, the condition of financing can be waived. If this is the case, it can make an otherwise lesser offer much more appealing to the sellers, as it is telling them that there is no chance for the deal to fall through on financing.
The flip side, however, is that you, the buyer, cannot back out if you end up not being able to secure financing. I cannot stress enough the importance of working with experts to ensure you won’t be stuck with a house you can’t get financing for! Working with professionals is key to protecting your interests!
If you are able to exclude the condition of financing, it can really help swing the odds in the favour of your offer in a multiple offer scenario. It is by no means a guarantee, but it’s an excellent strategy that can make a difference, resulting in a winning offer as financing tends to be the condition that does carry the most weight for sellers when they are considering offers.
Because time is of the essence in a seller’s market, it is wise to sit down ahead of time with your real estate professional to discuss these strategies and have a game plan in place, so when the time comes to put in an offer, you have already done the leg work for the financing and have all of these details sorted and ready to go. The devil really is in the details and having an experienced real estate professional with a network of resources at their disposal can minimize the stress associated with multiple competing offers, not to mention increasing your chances of coming away with a winning hand!
Are you ready to buy? Let's chat about your individual strategy to make it happen! Email me!