In many areas around Canada, low inventory is creating a bidding war between buyers. According to a recent study, more than one-third of Canadians are willing to enter a bidding battle for the home they want, up 21% from 2013.*
How can you outbid other buyers and get the house you love? Follow these simple tips:
- Do your research. If you have your heart set on living in a certain neighbourhood, find out how long a typical home in that location sits on the market before selling and how much homes are selling for. This will give you a realistic estimate of what you can expect to spend.
- Get pre-approved for a mortgage. Pre-approval, in addition to getting the rest of your finances in order, will help you figure out how much you can spend so that you don’t overextend yourself financially.
- Maintain perspective. If your bid is rejected, it’s natural to become more aggressive when you bid on the next home. However, this may cause you to pay more than you had originally intended. While no one likes rejection, don’t take the bidding war too personally.
- Have the cash to cover the difference between the negotiated price and the appraised value of the home. Mortgages often do not cover more than the home’s appraised value. Because appraisals are partially based on comparable sales in the area, it’s possible for the appraised value to be lower than the negotiated price due to foreclosed and distressed properties in the area. In this case, it’s helpful to have enough money saved to make up the difference.
*Source: Bank of Montreal, BMO Home Buying Report 2014