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Home bidding war

Bidding Strategies for the Potential Homebuyer

Homebuying, whether you want it to be or not, is a competition between you and complete strangers, all vying for the grand prize of a new home at the best possible price. In the spirit of competition, many are willing to do whatever it takes to metaphorically “win the race” by cutting corners in order to be the first to place an offer. According to Ricky Chadha of The Globe and Mail, this mentality has led to a growing concern among first time homebuyers about whether to add a contingency on an offer requiring a home inspection. If a home stands out from the pack during your search, it will more than likely generate a lot of interest from other buyers, some of which may be persuaded to skip the inspection for the sake of being first to the table with a serious offer.

The market for homes for sale in Toronto is hot, despite rising prices and dropping sales, and multiple offers on any listing is not uncommon, which only increases the level of competition. Sellers with multiple potential buyers will often look to offers with the minimum of conditions, and unfortunately, the home inspection clause is often one of the first to go. So when is it safe to drop a home inspection from the purchase of a new home? According to Chadha, your offer strategy should depend almost entirely in the amount of interest and offers the particular home generates. In other words, you should not treat each home exactly the same way, and gauge each situation independently.

The scenario can be broken down dualistically, with options split into one of two Home bidding warcategories: whether no other offers exist, or whether many multiple offers exist. If you find yourself in the rare situation where no other offer exists for the home in question, then add in the home inspection clause. It’s wonderful to be in this position, because a seller is likely not going to reject your offer on this condition alone, simply because no other competing offers exist. If you do get any resistance from the seller, you can offer to tighten up the timeline for the home inspection as a negotiation chip (perhaps two business days instead of the standard five), but ultimately, the buyer holds a lot of power in this scenario.

Strategic offers when multiple offers exist can be a bit more risky, but sometimes it is necessary to take risks in order to get the home of your dreams. You still have the option of requesting a home inspection, whether it be after the offer is made or pre-offer, but you run into the possibility of having the seller reject your offer outright, or have a competing homebuyer make their offer look more attractive by not including a home inspection clause. If the seller seems hesitant to allow you to perform a home inspection (at your expense), or has provided you with a home inspection report that he/she had financed, a red flag should pop up in your mind. This could be a sign that a seller is trying to hide something particularly damaging about the home.