Are we in a Buyer’s Recession?
Tips for navigating in a Seller’s Market
Over the past few years the Ottawa Real Estate Market has been good for buyers. Prices have been stable and homes have been affordable. Sellers had a reasonable expectation that a home will sell and buyers could purchase within a reasonable time after the property got listed. In today’s market that seems to be reversed.
Everyone is talking about it being a booming market, but ironically it is not a booming market if you are a buyer. It is a “recession” when Sellers cannot sell their homes. However, when Buyers cannot purchase a home for lack of inventory or losing out in competing offers, then to me it is a “Buyer’s Recession.” I believe our Ottawa Market is experiencing the same activity as in Toronto and Vancouver. Today it seems that most homes are being sold over asking price with multiple offers.
As Buyers how do we prepare ourselves in a Seller’s market?
- Price is crucial but not the only factor. However, do not offer below the list price. There may be other factors that are equally important to the Seller.
- Get pre-approved and provide the seller with the bank’s pre-approved letter. This will give the seller confidence that you can afford the property even if you do not have a condition on financing. Use an experienced mortgage broker. They will know which financial institution is best suited for your situation and which ones are more in tune with appraisal when the offer price is higher than the asking price.
- Don’t ask for more than what is in the MLS listing information. Maybe right now is not the time to ask the seller to throw-in the washer and dryer or paint the master bedroom.
- Give a good deposit. Sellers will take your offer very seriously when they see a high deposit. They feel less risk that a buyer may walk from a deal when the buyer has much more skin in the game.
- Give the seller the closing date that the seller wants not what you want. Or even close on the property a few days or week before the seller wants to vacate so that the seller can get their money sooner and not be pressured to move out right away.
- Write a personal message or video when submitting an offer. An offer can be tipped in your favour by creating an emotional response. Sellers have an emotional attachment to their home. Tell them why you’re the ideal buyer and compliment them on why you fell in love with their home – a little flattery goes a long ways. A few years ago, I had buyer in multi offer situation. We got the home not because we had the highest price (a couple thousand lower) but because my buyer commented that he was from Tuscany Italy which was the Seller’s favourite place to travel.
- Broaden your search criteria. If it is difficult finding a home in a specific neighbourhood, perhaps move outside that area, you may find more opportunities. Don’t limit yourself to one style of home. For example, if you are looking for a single family home at a lower price which rarely comes available, perhaps look at other types of home such as a town home or semi detached. You need to be more flexible. In a rising market, I’ve seen buyers waiting for the ideal home that never came up and ended up not affording anything.
- Get a building inspection in advance of an offer. If you want to go firm without conditions but you’re concerned about the condition of the property, some building inspectors will give you a discount to perform a quick assessment just focusing on the basic components of the home. I always tell my buyers make sure you a have a little extra money put aside to deal with any other minor deficiencies after closing.
Preparing a good offer – sometimes less is more
When confronted with a multiple offer I always call the listing agent to get tips on what is important to the seller. I often get comments from my buyers that a seller can always counter the offer if there if something in the offer that seller does not like. What makes you so special? Imagine that the seller received two offers with the same price. One of them meets the seller requirements more than the other offer. Which one will the seller take? Well of course the seller is going to take the one that best suits the seller. Why would there be any reason to counter the other one.
Make the offer simple. I find that the best offer is the one that isn’t overly complicate and full of unnecessary clauses. For example, an offer states that the appliances are to be in good working order. The Seller decides to accept the offer but would like the buyer to take out this specific clause. It’s possible by the time the selling agent goes back to the buyer to remove the clause a better offer comes to the Seller and gets accepted. This happens more than you think. So make it easy for the Seller to accept the offer now.
Do not get frustrated and be patient. It is important to know your financial limitations. Don’t get caught up in the frenzy and put in an offer more than you can afford. But if there is a property out there that you really like and you can afford it, even at a higher price, then what is the worst that could happen? Did you over pay? Maybe? Perhaps you just paid next year’s price. Is that so bad considering you got the home you wanted. And if you lose out, one thing is for sure, in any market there is always another opportunity around the corner. We just don’t know about it yet. But it will be there!
by Paul Franchuk
Remax Hallmark Group, brokerage