Bridge Financing – what is it? Do I need it?

Bridge financing refers to a situation where you have to pay for your new house and you haven’t sold your old one, or where you’ve sold the old one but the closing date falls after the closing date for your new home.

You essentially will be carrying two properties, one of which has to be completely financed until you can get the money out of the other. And so you need to “bridge” that period with new financing.

Bridge financing used to be relatively easy to obtain, but not any more. The new financing rules introduced last year have tightened up lending and made it much harder to borrow. I was shocked to learn recently that banks no longer pay much attention to your equity, only income. The  fact you have a clear title home, a great  credit rating, and money in the bank, isn’t enough —  you have to have enough income to qualify for the loan and with higher debt-service ratios and new stress tests, it isn’t easy.

And that makes it difficult for folks who are asset-rich but self-employed or on a pension.

I’ve spoken to two mortgage brokers about this. Both  confirmed that bridge financing is a lot harder to get than it used to be.

They suggested taking out a secured line of credit if you own  your existing home clear title  (you can borrow up to 65% by a LOC and you don’t have to use it until you need it). You can get another 50% secured LOC on the new house. But there are costs: appraisals on both properties (around $ 450 each) plus legal fees and registration fees. And if you tell your lender you’re planning to sell, you may not get the loan at all: lenders don’t like secured LOCs on houses that are going on the market.

If you don’t own your existing home free and clear, this option won’t apply. You may have a portable mortgage, but you may need more than that.

If so, you may be looking at alternative lenders or specialty products. There is one for realtors, for example, but we have to have 20% cash down. Even then, the lender wants to charge a fee of one per cent of the amount of the loan, so if we are buying a $ 600,000 house and have $ 120,000 in cash, we’d have to pony up $ 4,800 in fees, even if the loan is only for a few days or weeks. I find that a bit draconian, don’t you? Frankly, it’s verging on usurious, in my opinion.

Other options require that you have one-third in cash, or as much as fifty per cent as a down payment, and even then you’ll face a higher interest rate. How many of us have two or three hundred thousand sitting in a bank account? Not too many, I’d guess.

Some lenders want you to actually put a mortgage on the new house, or face a three month penalty to pay it out. Any way you look at it, it’s expensive. So there are no easy answers, not even for people with great credit who, like me, assumed that borrowing would be easy.

So what can you do?

Well in a slow market, you might be able to persuade a seller to accept a right of first refusal, allowing you to sell your home first before you have to firm up your purchase of theirs. But that’s a lot harder to get in a hot market, and even then, you may find that you are forced to close on the second house before the proceeds from the first sale are in the bank.  You had better be sure you qualify for bridge financing, just in case a firm deal collapses — it’s been known to happen.

My advice to buyers used to be to buy first and then sell, because it’s usually a lot harder to find a place you love than it is to sell your house.

But because of the problem with bridge financing, my advice has completely changed. I think you have to sell first and arrange to stay in rental accommodation, or at the cottage, or with relatives, until you find the home you want. Or have lots of cash on hand, and be ready to swallow some very big fees and penalties.

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I’m buying a new build home – do I really need a realtor?

So you’ve decided to buy a brand new home, built from scratch – how exciting! The builder has a salesperson who seems very knowledgeable and the price is non-negotiable. Is there any reason to have your own realtor?

Well, that salesperson acts for the builder, not for you, so my short answer is “yes.”

I recently helped a client navigate the purchase of a new build condo. I prepared a long list of questions (these appear on a previous post). These included things like, for example, where the HVAC was going to be located (turns out the A/C was going to be on the balcony, which would reduce the usable space, but not on the roof above, which can be noisy), and whether there was any rental equipment where the costs would be passed onto the buyer (yes, a tankless hot water system, at $ 40/month). I won’t go over them all again, but there were probably a good twenty or thirty things I wanted to have information about so I could make sure there were no red flags.

I negotiated a $ 5,000 decor upgrade package for her as well, as an incentive. That upgrade meant she could put in granite countertops and a granite breakfast bar instead of laminate and also covered the cost of a deeper, double stainless steel sink and a kitchen faucet.

In a new build condo in Ontario,  the buyer has a ten day cooling off period under consumer protection legislation where they can change their minds, no reason required. Most use that time period (or should) to have their lawyer review what is often a very lengthy, confusing agreement.

I referred my client to a lawyer who deals with the new condo builds even before we had an accepted offer from the builder’s head office (i.e. before the ten day period began) so that we could get that review done quickly. To do so, I got a copy of the draft deal from the sales centre and sent it to the lawyer for review.

The reason for wanting to move quickly was because the sooner we reached an accepted offer, the sooner the builder would move to finish the unit, and my client wanted a summer move-in date, so earlier was better.

I followed up on things like making sure the decor package was referred to in the written agreement and that the parking spot that was pointed out to her during her site visit appeared in the schedule. I also liaised with the sales centre, lawyer and client, and made sure that verbal promises were put in writing.

After the legal review was completed by her lawyer, and we got a final copy of the accepted offer, I made sure that it said what it was supposed to say and that my client’s lawyer signed off on the changes.

Then, with the deal firmed up, I went to the Design Centre with my client to help pick out finishes. While we were there, she mentioned that the salesperson at the Sales Centre had shown her a different type of hardwood/stain  than the designer indicated was standard; I was able to negotiate the inclusion of that hardwood for free for her as well. The value of that upgrade was about $ 1,000, so in total, I saved my client $ 6,000. in decor upgrades.

The builder, I should mention, pays my commission so none of these services cost my client a penny. She’s thrilled, and I feel that she got good value by having me involved.

One thing you should know if you do wish to use a realtor is that most builders require that the client be registered by their realtor when they first show up in the showroom , or they won’t cooperate with us (i.e. won’t pay us a commission). So if you want a realtor’s help, don’t just drop by the Sales Centre — call your realtor first so s/he can set things up with the builder directly. Sometimes they want us there; other times, they agree that it’s okay for us to register later, but if you don’t give us that opportunity, we can’t help you at all.

And remember — that ten day cooling period only applies to new build condos. If you’re signing an offer for a house or a freehold townhouse, once you sign on the bottom line, you’re bound by the contract. If it doesn’t give you a ten day grace period to have your lawyer review the deal, you could find yourself stuck with terms you don’t like. All the more reason to have your own realtor to advise you.

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The New Ontario Fair Housing Plan – my thoughts on today’s announcements.

Premier Wynne announced new legislation today to curb housing prices in Toronto.

Here are my thoughts:

A non-resident speculation tax. Premier Wynne says it will apply only to non-Canadian citizens or residents who don’t live or work in Ontario, and only in the Golden Horseshoe. It will apply immediately.

If the tax doesn’t apply to those living and working in Ontario, I don’t have a problem with it. Where it was problematic in BC was where it applied to people who were planning to live and work in the province.

It will not apply to steelworkers and other exempted groups, refugees, and those who work for four years or study in Ontario for one year afterwards (I think I got those timelines right). But instead of exempting these folks upfront, it sounds as if they will get a rebate  after those time requirements have been met. (I’m not sure if I heard this correctly.)

My question is: how much of a factor are foreign non-resident buyers in the Toronto market? If it’s only 3-4%, as I’ve heard anecdotally, it’s not going to make any difference in prices.

There are no statistics, however, as there is no current data. Charles De Sousa, the housing minister, says there are around 6,000 vacant units in Toronto but I’m guessing that’s an estimate as there is no real way of knowing.

How will this tax apply to students and workers who are in the queue , i.e. who have purchased a home but are waiting to close the deal? The new rules may come into effect today but do they apply to purchases entered into before today? If so, and if those folks have to come up with that additional 15% now and then wait to get the rebate, it could be a real problem for them and create real hardship. Waiting for the details on this one.

Expanding rent controls. These will now apply to units built after 1991 as well as those before. I don’t have a problem with this at all.

New Standard Lease. This is a good idea; I’ve seen some pretty wonky leases that were drafted by landlords that included some pretty bizarre and one-sided clauses that (surprise!) favoured the landlords.

A new development charge rebate program. The plan is to work with municipalities to reduce some of the development charges imposed by them on developers. This is intended to reduce cost of building new rental buildings. Good plan if it helps; recent mortgage financing changes at the federal level has made it harder for these developers to get financing at all. If the federal government stepped in to reverse those changes and make financing easier, this could make a huge difference.

Provincial lands. Ontario will use some of the surplus Crown land to build new housing.

Paper Flips. This will apply to assignment clauses, where a purchase is assigned before closing to another buyer at a higher cost. It doesn’t sound like the practice will be prohibited; instead, the government will require disclosure so it can make sure it collects the appropriate land transfer taxes.

It doesn’t seem to address the situation where the seller gets less than fair market value for their property because they rely on a realtor who brings them a buyer, and then “flips” the property to another buyer by assignment, which is what the BC legislation addressed. (Apparently this was a big problem in the Lower Mainland). In BC, to address this issue, they required not only disclosure but also that the seller get all the profits from the assignment.

One situation I hope isn’t caught up in the new rules are the purchase of units in pre-construction condos, where investors buy several units with no intention of living in them, counting on the underlying value of those units to go up before the building is completed. If that practice is banned, it will be hard for a lot of developers to move forward, as it is often those buyers who provide the 70% in presale value needed for developers to actually build those buildings. Again, I look forward to seeing the details.

Lower municipal tax on new apartment buildings. This should help increase supply, again, if developers can get financing. Hoping the feds loosen up those new mortgage rules a little.

Real Estate Agents. Wynne promises a review of the rules around things like double-ending. Frankly, I’d be thrilled if they ended this practice –I think it is rife with conflict of interest. I simply don’t do it. In multiple offer situations, it absolutely gives the listing agent an advantage. I’ve posted before about the conflict of interest in trying to represent buyers (who want to pay as little as possible) and sellers (who want to get as much as possible) should be obvious to everyone. I’ve also seen situations where listing agents have held off on presenting offers while they rustled up their own. But for now, nothing’s changed.

Vacant Home Tax. The new legislation will empower Toronto to enact one. I’m not sure how this would work. Snitch line? Self-reporting? Watch for a whole new underground business to develop around house-sitting.

So overall, did I hear anything that’s going to reduce those crazy Toronto prices? Not much, to be honest. They all seem like good ideas, and down the road, it may help tenants if there are new builds going up as rentals. But I’m not sure the foreign buyer home tax will make a difference for long, and if it’s not implemented fairly, it could cause hardship to those who come to Toronto to work or study.

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My thoughts on Ottawa Real Estate based on my CBC Interview today!#OttawaMorning

I was on CBC  radio’s Ottawa Morning with Hallie Cotnam today to talk about the Ottawa real estate market and the proposed (as yet unknown changes) to be introduced in the April 27 budget. (Here’s a link to that interview!) Those changes, as we know, are meant to cool down the Toronto housing market which saw a 33% year over year increase in prices.

Peggy at CBC

Me and Hallie Cotnam. She looks a lot more alert than I do at 7 AM, that’s for sure!

On radio, there isn’t a lot of time to amplify the discussion, so I thought I’d take a minute to do so here.

First of all, while Ottawa’s market is hopping, it’s nowhere near as hot as Toronto’s. We saw  a 17.5% increase in residential sales year over year and a 22% increase in condo sales in March. Prices were up 5.5%. So that’s a nice, healthy increase, but not out of whack for a market that’s been slow, almost stagnant, for the last several years.

One factor that shows the difference is our average days on market  (that’s how long it takes to sell the average house). We’re at 92 in Ottawa. It was 12 in Toronto the last time I asked a realtor pal in that market.

We talked a bit today about the government’s stated goal of wanting to make housing more affordable. If that’s the case, some of the options being tossed around don’t make sense and could have unintended consequences.

For example, the last time the feds tried to slow down the housing market, they made it harder to borrow money. The changes to the mortgage rules made it harder for first time buyers to borrow. They certainly didn’t make housing more affordable for them; they had to come up with more money for down payments.

Similarly, the provincial government says it now wants to close a loophole that allowed landlords of post-1991 built buildings in Toronto to raise rents without being subject to rent controls. There are reports of condo tenants whose rents have doubled since that announcement while landlords try to get their increases in under the wire. Not exactly more affordable for those folks either.

I’ve heard the provincial minister, Charles De Sousa,  talk about real estate speculators as well. He seems to be concerned about buyers who buy new builds and assign (sell) their contracts to new buyers for more money before closing. (In BC, this was happening with home purchases generally. The problem was addressed by requiring seller’s consent to any resales, and ensuring they get any profits.)

But in the condo market, those buyers — the ones who come in and often buy four or five condos before the shovel hits the ground and then assign their contracts for a profit before the buildings are finished — are often providing the financing the builder needs to reach the 70% in pre-sales required to get the project rolling. Shut them out, and you are shutting down a perfectly valid investment strategy (why shouldn’t I be able to make a profit when the underlying value of the property I bought rises in the year or two it takes for a condo building to be completed?). You may also find yourself with fewer condo developments,. That means less supply and higher prices.

Then there’s the foreign buyer tax in BC that may be replicated in the Ontario budget. Will it be targeted at Toronto only? Pundits credit the 15% increase in BC for a 40% drop in sales there.

First of all — are foreign buyers the reason behind  Toronto housing prices? Do we know? And secondly, if they are, where are they from? We don’t have any data to answer that question. We can’t even be sure that the BC market was being driven by foreign purchasers; studies now suggest that it wasn’t and that it’s the uncertainty in the market those changes created that’s caused the present drop.

One thing we do know that Ottawa has lots of foreign buyers who come here to work in our technology sector, work at our hospitals and teach or study in our universities. Do we really want to discourage those people from finding affordable housing?

As I mentioned to Hallie, I was contacted by someone in BC last year who was directly impacted by the 15% foreign buyer tax. He was an American who’d been offered a job in the Lower Mainland. He decided to buy a home for his family — as I recall, he and his wife had four kids. He put down a hefty deposit, only to find out before closing, without any advance warning, that he had to come up with an extra 15% or forfeit his deposit. He couldn’t afford to do either. The new tax kicked in without any reprieve for those who’d already purchased.

Is that really the way we want to treat good faith buyers? Like some kind of banana republic where the inflation rate changes daily?

My problem with the government trying to fix the Toronto problem is that they have no idea what’s driving the market increase. It’s possible that the 15% foreign buyers tax in BC actually drove foreign buyers to Toronto and has driven up  prices. Assuming that’s true,  introducing a foreign buyer’s tax in Toronto could drive more buyers to Ottawa, making homes less affordable here,  and then what? New taxes in Ottawa? It’s like a game of whack-a-mole. But the point is: we don’t know. There is no data.

Imagine a doctor saying to you, “I know you’re sick but I’m not sure why. Here’s a prescription based on your symptoms, without any accurate diagnosis. It may not make you better, but it could cause side effects you don’t like and it might just kill you.”

I’ll wait to see what the budget brings, but I’m not optimistic.

(One small correction from my CBC interview. The average sale price in Ottawa is currently  is $415,467. Hallie had suggested $ 300K; I said I thought we were over $ 500 but I was thinking of sales volumes in March. That’s what happens when you get up at 5 in the morning for an early interview!)

And finally, always nice to see this kind of feedback, from our Mayor:

 

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Renovations that don’t add value to your home.

A lot of people do renovations without really thinking of their impact on resale.  I walk through other people’s homes most days and see hundreds of thousands of dollars that have been wasted or worse, that will reduce the value of the homes. Here are some examples:

Income suites. Creating an income suite in an area where there is little or no demand for rentals is a mistake. It’s one thing to put an income suite in an area with high demand and density, but despite what you see on TV, you’re going to spend a lot more on those renovations than you will get back in rent, particularly if they have to be soundproofed, fire retrofitted and inspected. And you will be taking away living space that prospective buyers want for their own families. I can’t tell you how many times I’ve had buyers walk into a house that has an income suite in it and say, “oh no, we’ll have to tear that out.” Not everyone wants to live with tenants. An income suite narrows your market.

Pools. Pools are great if you loving swimming but not so great for resale unless you’re out in the country where everyone has one. They are expensive and time-consuming to maintain and we only get to use them for a few months in Ottawa because of our weather. If they aren’t properly fenced (and even if they are), they will  deter a lot of buyers with small children. At a $10-15K cost to break up and remove, getting rid of one isn’t easy.

Ill-thought out Kitchens. If you’re going to redo your kitchen, spend the extra money and get a designer. I’ve seen wall-mounted ovens put up on walls above eye level; cabinet doors that open into sinks or prevent dishwashers from opening; wall ovens placed where they open into doorways, and create hazards. I don’t care how inexpensive your cabinets are, they can be refaced or replaced; it’s the placement and design that’s most often the issue. It’s expensive to move plumbing and electrical and hard for buyers to get past those mistakes.

Paved backyards. Low maintenance is one thing, but an asphalt back yard is a major deterrent to buyers. Maybe you  want a place for your boat, but I don’t care; this is one of those things that buyers really hate. I’ve seen three of them in the past month. Ugh.

Converted garages. Seems like a great idea, doesn’t it? To turn the detached garage into a man-cave? Not if it’s the only place you have to put your patio furniture, lawn mower, or even worse, your car. I’ve seen people turn attached garages into extra bedrooms  and living space; bad idea. Most people want garages to park their cars in, and if they don’t use them for parking, they still don’t want to park their cars in the driveway right in front of their “garage” windows. Even worse are the ones where the inside has been redone but they still have garage doors. Double ugh.

Main floor bathrooms with showers and tubs. If it’s not a bungalow, stick with a powder room. No one wants to take a bath or a shower right next to the kitchen. If that’s the only place for a full bath, fine, but just be aware that not too many buyers like it.

Be thoughtful when you renovate. The choices you make may limit your market when the time comes to sell.

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Buying a new condo from a builder? Here’s a checklist of questions.

If you’re thinking of buying a new condo from a builder, there are some things you should find out before you sign on the  dotted line. I was recently involved in negotiations with a builder on behalf of a client who was thinking of purchasing one for an elderly relative and wanted my input.

First of all I needed to find out if the builder cooperates with realtors, i.e. if they would pay my commission if I got involved. Usually that requires that we show up for the first meeting at the Sales Centre with our clients and register them, but in this case the salespeople said it was fine if my client wanted to drop by on her own.  That gave her a chance to see the unit when I wasn’t available last week; I went back with her today.

Here are the questions I asked the salespeople:

How many units have been sold? At 70% sold, the builder will take steps to register the condominium corporation. Until that happens (registration can take several months), once your unit is ready for occupancy, even if it isn’t registered, you’ll have to pay interim occupancy fees or risk losing your deposit. If the project doesn’t sell well, the builder may have to rent units out; it’s good to know if the people around you are renting or owning because it does change the dynamics.

What are interim occupancy fees going to be?  These are what the buyer is required to pay once the unit is ready for occupancy but while the builder is waiting for the condo corporation to be registered.  They include condo fees, the land portion of the property taxes, and a proportionate amount for common spaces. They will also include interest on your mortgage if you are not a cash buyer, but not principal amounts.  In our case, the salesperson said he would check with their accountant and get back to us.

How much will condo fees be? The builder should be able to tell you what the condo fees will be, at least initially. Bear in mind that these fees probably don’t include a portion for a reserve fund for future repairs and will likely go up once the condo is registered and the condo board is in place. Based on square footage, this builder told us to expect to pay $ 209/month.

How much deposit insurance does the builder carry?  The Tarion warranty which covers new builds only covers $ 20K of deposits. If your builder goes bankrupt, where does that leave you? Ask if the builder carries insurance for deposits over $ 20K.  This builder doesn’t ask for more than $ 15K in deposits so my client is covered.

What will the taxes be? The builder should be able to give  you an approximate value. (They are going to run around $ 2,300/ year for this unit.)

How long to occupancy after signing? In the case of my client, the salesperson said occupancy would be sixteen weeks from acceptance, but also agreed to see if he could expedite that time frame. Note that acceptance doesn’t come until the ten day cooling off period for your lawyer to review the contract is over (you have ten days to back out of the contract and get your deposit back) and that ten day period begins on signing. I asked him if the builder expected to run late, and if so what kind of notice my client would receive. He told me they’ve never had a delayed occupancy in thirty-four years. Great answer!

Does the builder reserve the right to change specifications? Often the builder’s contract allows them to change specifications unilaterally and sometimes without any notice. I was concerned about things like ceiling height being dropped to accommodate ductwork, but here the space has already been roughed in and drywalled — we went over to take a look. Ask anyway — nothing worse than finding out what you ended up with isn’t what you thought you were getting.

Is there any leased equipment? The costs of leased equipment are passed onto owners. In our case, when I asked, I found out the furnace was owned but the tankless hot water system is leased although the buyer can purchase it outright at an additional cost. My client was happy to find out there was a tankless HWT as it will keep down hydro costs, but you need to know what that buy-out cost is, and what the rental is, so you can make an informed decision. The tank rental will cost my client $ 38/month.

What are utilities costs likely to be? The salesperson was able to answer this based on other buildings they’ve built:  including the HWT rental, it works out to about $ 250/month.

Where is the A/C located?  I asked where the HVAC system was going to be located. In a flat roof building it can be right up on the roof, and that can be noisy. Here, because it’s a pitched roof, the A/C unit is actually located right on the unit’s balcony. Knowing that, I wanted to know how big it would be and where it would be positioned, so that I’d know how much space my client would have left to enjoy on the balcony. (The answer was that the balcony is 10 x 6′ and the A/C is about 18″ x 18″– we were able to see exactly where it will be hooked up.)

What kind of heating is it?  In our case, it is forced air gas, and the furnace is right in the unit, which is great. But you need to know if it’s that or baseboard, because baseboard will be a lot more expensive.

What are the basic finishes?  You need to know what’s included in the base price and what is considered an upgrade.  In our case, there were a lot of inclusions already in the base package: stainless steel appliances, granite counters, engineered hardwood floors and ceramic tile.

Are there incentives? Ask! Even though the basic package included a lot of higher end finishes, I  was able to negotiate a $ 5,000 decor package for my client. That will allow my client to put in an extended kitchen counter, among other things, where she can have seating.

Will there be nearby construction? Right now the unit has lots of light. We wanted to know what kind of construction will be taking place nearby that might affect that, as well as noise. (There will be some, but it shouldn’t affect the light — there are two new buildings going up on the same lot being developed by the same builder.) This is a big one: make sure you know what development will be taking place and how it might affect your unit.

What kinds of noise remediation is being done?  I wanted to know what steps were being taken to mitigate noise from other units. For example, this unit is right next to an elevator. It turns out there will be a closet in the unit between the elevator and the unit that will act as  a buffer. We were satisfied after talking to the salesperson that other steps have been taken to reduce noise from the upper level, but were also aware that there could be some noise from the upstairs unit given the hardwood flooring.

How accessible is the unit? I wanted to know if the building was wheelchair accessible; it does have an elevator. The person living in the unit is elderly; I wanted to know what would happen if she lost mobility. The living space is open but doors are standard sizes. It turns out there is an accessibility package if my client wishes to pay for the upgrade.

Are there any amenities? In our case, there are none. But you pay higher condo fees for these, so you need to find out.

Can you have a walk-through?  We requested a walk-through of the unit, even though it isn’t completed and the salesperson agreed. This meant booking a time when the workers were finished. When we took a look at the actual unit, we discovered there was a weird closet in one bedroom. Seeing it let us go back to the original plans to find out why it was located where it was, and move it if we chose to.

What are the demographics of other buyers?  As noted, the person who will be living in this unit is elderly. We asked about the age of the other buyers, and were satisfied there will be  a good mix of ages, but there are at least a few other buyers around her age so she won’t be all alone.

What can these units be rented for? This unit could end up as  an investment property down the line, so we asked and found out the builder had rented units in the past for $ 1300-1350. That information helped my buyer see the unit as a potential investment in the future once her relative no longer needs it.

In this case, the salespeople were honest and forthcoming and a real pleasure to deal with. A big shout-out to Valecraft: Jeff and Steph gave us enough information for my client to make an informed decision, without any pressure. Much appreciated!

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Competing in a super hot real estate market.

Ottawa’s real estate market has taken off. We are seeing multiple offers all over the place. Multiple offers are great for a seller, but they can be frustrating for a buyer. Here are my tips on how to compete:

Make a bully offer. The listing says, “No offers until Thursday at 6.” It’s Monday. There are people streaming through the house when you go to see it, and you want it. What do you do?

Well, you don’t have to wait until Thursday. Your agent can submit an offer now, but it better be a good one, or the sellers aren’t going to respond. They know by waiting until Thursday, they’re likely to get multiple offers and top dollar.

So put in your best offer now. The listing agent will have to notify all the interested parties about the offer and let them know when it expires so they have a chance to compete, so don’t give a long irrevocable period, just long enough for the listing agent to get hold of the sellers and make a decision. Give too long and you’ll be in a multiple offer situation anyway.

If the seller says, no thanks – we’re going to wait until Thursday at 6, get a home inspector lined up or a friend who’s a contractor and go through the house before then. If you’re still happy with what you find, call your mortgage broker and make sure your financial ducks are in a row.

Get an offer ready with as few conditions in it as possible. An offer that doesn’t have conditions, or fewer than the others,  is appealing to a seller: if they sign it, they’re done. The more conditions there are, the more likelihood there is of something going wrong and the deal not going firm. They’ll take less money for less risk.

Make your very best offer upfront.  Most times you won’t get a second chance in a multiple offer situation.  Yes, it’s a blind auction and you don’t know what anyone else is offering.

But here’s a rule of thumb: If there are more than two offers, forget about getting the property for $ 5-10K over asking; you’ll need to go a lot higher than that. In most multiple offer situations, the listing agent has priced the home 5-10% below market value to get interest, so use that as your guide.

If 5-10% higher than the list price is what they think market value is, how much over that are you willing to pay to get your dream house? Remember, house prices are up 8% over last year in Ottawa so factor that in when you are looking at comparables: they are already out of date.

Take your realtor’s advice. Several times I’ve gone into a multiple offer situation with offers I know won’t be accepted because my clients haven’t listened to me, and are going in too low, or with too many conditions. Listen to your realtor; they know the business, you don’t.

It’s about relationships.  A house deal is not a zero sum game. It’s not just about money. Sellers love people who love their homes. Where two offers are close, they’ll tip towards the person they like:  It’s human nature.

I was successful in a multiple offer situation with a buyer (eleven other offers) who didn’t have top dollar  because I found out the sellers were from Newfoundland and so was my buyer. I made a point of presenting my offer in person and mentioned that connection, as well as how much he loved the art in the house because it reminded him of home. He got the house, and the sellers even left behind some of those pieces of art for him, because we built that relationship, just in that brief interaction.  But they later told me about agents who came in thinking they could get the house for less than list price by bad-mouthing it. Not a good strategy.

Meet the sellers’ interests. If the sellers want a June 1 closing date, give it to them, even if it’s inconvenient to you.  If they want to keep the mirror in the powder room, and you love it and want it, let them take it with them and  ask your realtor to tell them how beautiful it is and to ask their agent where they got it. Either way they’ll be flattered, and they may just leave it behind.

In one multiple offer situation, we found out the sellers had lost  a prior deal over a leaky skylight. I made sure to assure them that we’d take care of that problem and that they could count on my buyers to complete the deal. My buyers didn’t make the highest offer, but they got the house.

Always be reasonable. I’ve had multiple offers come in where I knew the agent and had problems with them in the past. When I’m advising my sellers what to do, what do you think I tell them in that situation?

I learned at Harvard when I trained in Negotiations to always be trustworthy, but never trust anyone else. It’s advice I bring  with me into negotiations in multiple offers as well. A person who is difficult to deal with during offer negotiations will be that much harder to deal with in the stress of an actual deal. Be reliable, and be reasonable. Sellers and their agents will respond to that, and it might well be the tipping point in getting you that dream house.

 

 

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