Finding the perfect house can take a few trips around the block and plenty of scheduled visits and open houses. But once you’ve found one that meets all your needs, you might be ready to put in an offer.
If you’re an interested buyer and are wondering what the steps are to putting in an offer on a home, read on.
Wait For the Offer Date
Toronto’s real estate market is a sizzling one and has been for quite some time. As such, it’s not uncommon for listings to attract multiple offers at the same time, giving sellers the benefit of picking and choosing which offers to negotiate with. A multiple offer situation obviously puts sellers in the driver’s seat, spiking competition and enticing buyers involved to offer the highest price they’re willing to pay.
It’s highly likely that the listing that you’re interested in has been strategically set up for a multiple offer situation. You will be able to verify this by carefully reviewing the listing description. In it will be something along the lines of, “Offers will be accepted and reviewed on X date at X time.” You can still submit your offer any time you like, but the seller won’t look at your offer – or any others – until the specified date and time.
At this point, all you can do is wait until the seller communicates with you. They will either politely decline your offer, ask you to improve it, or accept it right off the bat. If you are asked to improve the price, it’s important that you make sure you don’t offer any more than you can comfortably afford. Not only that, you don’t want to pay more for the home if it is not valued that much according to the current market. If you do, you may have problems with the appraisal and subsequently have issues getting a mortgage.
Make Your Offer Based on the Competition
If the home you’re putting an offer on is being set up for a multiple offer situation, your offer strategy is going to have to be a bit different compared to your offer with no other buyers in the picture. In the case of a multiple offer situation, you will want to put your best offer in right from the get-go. There really isn’t very much wiggle room for negotiations, so don’t bet on going in “low” in hopes of negotiating back and forth.
If there are no other buyers involved, the situation is more relaxed as there is really no other competition until another buyer submits an offer. In this case, you may want to submit an offer price that’s slightly under the asking price, as the seller will likely counter the offer (unless they believe that what you initially offered is sufficient).
Just be careful not to “lowball” the seller with an offer price that’s significantly lower than the asking price, unless the asking price is way above its market value. Lowballing is a sure-fire way to offend the seller, who may even decide to throw your offer out completely and be unwilling to entertain it at all.
Counter Appropriately
In a typical real estate offer environment, the seller will likely counter your offer. If they do, be sure to counter appropriately. In fact, you should be prepared for the seller to counter in order to know exactly how you will respond to it. Don’t be surprised or flustered if there is a lot of back-and-forth bantering, as it’s pretty common for a few counteroffers to be made before an offer is finally accepted.
You should also be prepared for a deal not to be reached at all. Even after a slew of counteroffers, sometimes buyers and sellers are unable to reach a meeting of the minds. If that happens, don’t fret. There will always be another house out there that will be right for you.
Agree on Price
Of course, the price will be the first thing that sellers will notice on your offer. The more money they can squeeze out of you, the better. That said, it’s important that the price you offer is a fair one and matches what the current market dictates.
That’s why your real estate team will provide you with a list of “comps,” which are other listings that are similar to the home you’re putting an offer on that have recently sold. This will give you a good baseline to follow when it comes to deciding on the right offer price to include in your purchase agreement.
After some negotiation, hopefully both you and your seller will be able to come to some sort of agreement on the offer price. Once you do, you’re one step closer to a done deal!
Agree on Conditions
If you’ve included any conditions in your offer, then that’s an added step in the negotiation process. After the price, closing date, and deposit amount have been agreed on, the conditions will also have to be reviewed and negotiated.
In a typical purchase agreement, you’d be well-advised to include some conditions in your offer. These are meant to protect you in case something about the deal is not satisfactory to you. For instance, it’s rather common for buyers to include financing, home inspection, and Status Certificate (for condos) conditions in their purchase agreements. These will provide some time for the buyer to get approved for a mortgage, obtain a satisfactory home inspection report, and ensure the condo corporation is financially sound.
The seller can always cross these out if they want, or even change their expiry dates. These items are up for negotiation, as is any other part of the contract. Everyone has to agree on all components of the purchase agreement in order for a deal to be reached. Once they do, everyone signs off on the contract, and the sale is conditional!
Then, once all conditions have been met, condition waivers or letters of fulfillment will be signed and submitted, and the deal is done! Now all you have to do is sign a few documents at your lawyer’s office and get the keys to your new home! Congratulations!