If you have experienced searching for a house being sold on certain areas of the Canadian real estate market, it is a sure thing that you’re familiar with these so-called “bidding wars”. It is basically about different buyers fighting over the rights to buy a house through bids. While the whole thing may sound fair and fun for buyers; it can lead to financial disasters.
Current data shows that many of those who have won bidding wars have overspent as much as $10,000 – $20,000 over the actual house value. This is a big issue because the resulting mortgage may be more than what a homeowner is capable of handling.
In case of overpriced winning bids, an individual would have to shell out cash right away. He or she might find out too late that the mortgage company can no longer provide the excess amount needed to pay off the seller of the property. In this case, the buyer will be obliged to go to new sources and consequently get himself deeper in debt.
The good thing is that there are actually ways to minimize the costs of bidding wars. These are as follows:
A Buyer Must Think Like A Seller
This means putting one’s self on the shoes of another. If you are a selling a house, what are the things that you’d want from a buyer? A high bid is there of course but there are factors that would really need to be considered. These include the buyer’s seriousness about the deal, the time frame, the mode of deposits, and others. The bid must be designed in such a way that it reflects not only what the buyer wants but also what the seller needs.
Research And Proper Preparation Must Be Done
An individual should not go head first into real estate property bidding without proper preparation. Yes, there are agents and brokers who can facilitate the process but their job is often limited by what their clients will specify. As an example, staying away from areas where multiple offers for houses is common is an idea that is oftentimes opposed by prospective buyers. It is also a wise move to decide on a maximum amount that one is willing to spend. A buyer should stick to this no matter what happens down the road. In case a house for sale has been spotted, it wouldn’t hurt to spend $400 (more or less) on the services of an appraiser. The figures that will be given by an appraiser will guide the buyer on the right amount to bid.
Deposits Can Add Convincing Power On A Bid
A deposit of 5-10% should do the job for a buyer. Yes, higher amounts can certainly attract attention. However, this doesn’t guarantee a sure win in a bidding activity. A good way of increasing odds of winning is to use a certified check for the deposits. This will convince the seller that a buyer really has the money and is serious about completing the transaction.
Minimizing the costs of bidding wars isn’t hard to accomplish. By setting emotions aside and letting wise decision-making skills take over, a good deal can always be won.