Thank you for visiting www.GreatMortgageAdvice.com By Cecilia Ramos
Multiple offers in Real Estate, explained
Multiple offers. Bidding wars. These can take place in any market, when there are more buyers than available suitable or similar properties. It is very important that buyers are properly prepared for this extremely stressful process.
In my view, one of the main problems with the multiple offer process in today's real estate market is that there are very few rules for how the bidding will be conducted. The process is essentially unfair to buyers. This is not like a silent auction where you get to see what everyone else is bidding and then make a decision as to whether you want to make a higher bid. The seller does not even have to accept the highest bid. For example, a seller may prefer a lower offer, that has no conditions attached to it, to a higher offer that has conditions about financing or home inspections.
The seller cannot give out the personal information of the bidders or the amounts being bid and only has the obligation to tell all buyers in the process the actual number of bids received. Sellers can require that all buyers fax in their offers to the seller's real estate salesperson. Many buyers prefer to present their offers in person.
If you are competing on a property, I recommend that you take the following steps:
Research the general area that you are looking at moving to in advance, so that you can obtain general information about schools, parks, demographics and crime rate.
Walk the streets that interest you and start talking to the neighbours, to get a sense if this is the kind of friendly area that you would like to move your family.
Visit with your lender or mortgage broker in advance to obtain a clear understanding of your financial situation and what you can afford to spend in order to buy a property, without having to dramatically change your standard of living. It is wrong to sacrifice everything just to afford a more expensive home. You want a home that will create happy memories for a lifetime.
Work with a professional buyer salesperson. You need to know in advance the real market value of any property that becomes available. Many sellers deliberately list their property for a price that is 5 per cent to 10 per cent below market value, in order to generate interest from many buyers to drive up the price. You cannot be fooled by this tactic. You also need an objective third party to guide you through the negotiating process.
Always make your purchase conditional on a home inspection. In most cases, sellers will permit a buyer to conduct a home inspection in advance of submitting an offer, so that they can make their offer unconditional. The problem here is that a buyer may in fact pay for the cost of a home inspection report, but not have the seller accept his or her offer, as the seller can still choose any offer that he receives.
If you are at all suspicious as to whether there is in fact a competing offer, consider inserting a clause that states that your offer is being submitted on the basis that it is part of multiple offers and that if the seller does not receive another offer, you will have the option to either cancel or revise your offer. You can also include in your clause a requirement that the seller provides the name of the competing real estate brokerage that submitted the other offer. Buyers should consult their own real estate buyer salesperson or lawyer in preparing this clause to ensure complete protection.
Buyers, being prepared for bidding wars will provide you with maximum protection, even as you participate in this very stressful process. Next week, I will discuss how sellers can set the stage for potential bidding wars on their own property.
For all of your Real Estate and Mortgage Needs please feel free to contact me anytime. As always the referral of your family and friends is always appreciated.