Making an offer on a property (and the right offer for THAT property) is one of the most important elements of the home buying process. The right offer can or will get you in the door of the home you selected on the terms you want and may even save you thousands of dollars.
On the flip side – an unthoughtful offer that doesn’t have the merit to back it up can be an emotional rollercoaster.
There are a few different types of offers that your agent SHOULD chat with you about. Keep reading to find out (4) that we think are most important to muse over!
1. The Low Ball Offer:
A solid offer with a strong asking price, little to no conditions and a healthy deposit is not only ideal – but it is also a sign of a motivated and committed buyer. Sellers WANT to see this.
Unless the home is overpriced (which can happen), or priced to receive multiple offers (see below), any good listing agent should have already pulled comparable sales to support the list price before putting the home on the market. And while list price is often just a “made up” number by the seller and agent by the use of comparable sales and the return on investment the seller is hoping to receive – a lowball offer can be insulting. It shows the seller that the buyer has no true regard for the wishes of the seller – and often times the offer is rejected immediately with no intention to counter.
Alternatively, perhaps the buyer really does have regard for the sellers – but the price is simply out of their range. Truthfully, Sellers are usually in the business of wanting to make a return on their investment and unfortunately don’t particularly care if a buyer has fallen in love with a home that is out of reach.
2. The Full Price Offer:
The real estate market has sort of instilled in us that there is a need to always negotiate. But imagine that you have found the home you want purchase, have seen the comparables with your agent and feel as though the price will work.
Why NOT make a full price offer? In Toronto, the market can be chaotic and sometimes you just have to leap on the property you want when you finally find it. Going back and forth in negotiations can be time consuming and gives the opportunity for the agent to stir up additional offers in the process to pin yours against (sad, but the truth!).
Will your full price offer be accepted? That isn’t guaranteed. As always, the seller has (3) options when an offer comes in:
- Accept It
- Counter It
- Reject It
And just because yours was full price doesn’t mean that it is a home run – but it is a very good start. A full price offer helps to gain seller co-operation should you ask for a condition (such as a home inspection or time to sort out your financing), helps to lock out the competition in the event of multiple offers and also makes the listing agent look good by validating that he or she did a good job in pricing the property fairly.
3. The Negotiable Offer:
If you feel like ‘playing ball’ with the asking price you certainly can submit a negotiable offer. On one hand, you don’t want to pay more than you need to, or do you want to be taken advantage of. Submitting a good negotiable offer (approx. 10-20 thousand) below asking (property dependant) leaves some wiggle room for you and the seller to go back-and-forth on price.
If you are the only offer on the table – you will likely receive a counter offer and then work with the seller to get to a comfortable middle ground on price. They will feel satisfied that they almost received list price and you may walk away feeling like you ‘got a deal’. Two happy campers!
What Happens When There Are Multiple Offers ?!
4. The Multiple Offer:
The multiple offer situation is a common phenomena in Toronto. When a ‘hot property’ comes on the market and usually listed for below market value to get people excited – it’s commonplace for multiple buyers to compete for it. Because of this – you will likely end up paying over the asking price.
Do not fret however! This really just means that you are ‘buying ahead’ of the market in terms of value. While this may not seem ideal – with the appreciation that Toronto experiences yearly, your purchase price can, at times, catch up to market values in less than a year.
Submitting an offer knowing you are going to be in competition with many other eager buyers can be stressful, and knowing how much over-asking you are willing to offer to win is generally dependant on how many other buyers are in the running. Because of this – it is imperative to come in clean (providing no conditions) and hand-in a healthy deposit (5% or more) on the spot as a sign of good faith.
If your heart is really set on a particular property – a quick, competitive offer could be the surest bet to putting out that welcome mat!
After an offer is accepted by both parties – it becomes a legally binding contract between the Buyer and Seller. This is why it is so important to consult an expert for advice before jumping in on the market.
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