Don't Lose Your Head: How to Survive a Bidding War
It's crazy out there. The spring real estate season is well underway and as a result hundreds of Torontonians are suffering from PBWS (Post Bidding War Syndrome). Common symptoms include dizziness, lack of sleep, and a major case of the shoulda woulda couldas.
For the uninitiated, bidding wars occur when properties are listed at a price that is below their actual market value, and multiple buyers submit offers at the same time. In a hot market like we've been witnessing in Toronto for the past few years, multiple offers have become commonplace.
I've been involved in a few bidding war situations with my clients over the past several weeks, and I thought now might be a good time to share some tips on how to survive these situations with your head intact.
1. Know the property's value. Having a firm grasp on a property's actual market value is essential in any real estate transaction. This is where your agent earns their lunch. Providing you with the best possible information on value is not a nice-to-have, it's something you should demand from your agent.
2. Know your comfort zone. With my clients I always make a point of distinguishing between the maximum amount they can afford and the maximum amount they are comfortable with. The two are almost always not the same. Know your comfort zone and make a commitment to stick to it.
3. Have a strategy. This one seems obvious, but again, this is where your agent comes in. You have to anticipate how the bidding war will play out and formulate a negotiating strategy accordingly. No two bidding wars are the same and every listing agent handles them differently.
4. Wait for the next one. Paying more for a house than it is worth doesn't make sense in any market. A common side effect of bidding wars is that other home owners on the street see what has just happened and put their property on the market shortly after. The early bird gets the worm, but the second mouse always gets the cheese.
5. Keep your head on and have an EXIT strategy. Buying a house is an emotional experience. Being in a bidding war situation takes those naturally occurring emotions and cranks them up by a factor of ten. A lot of heads are lost and poor decisions are made as a result. Sit down with your agent beforehand and figure out what your breaking point is and what is going to make you run for the Exits-and stick to it!
How about you? Care to share your tales from the trenches of your own bidding war experiences? Drop us a line in the comments section.
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