- Hey, welcome back.
It's Nolan Matthias from Mortagage360
and today we're discussing how to win
in a competing offer situation
and specifically what you should do, what you shouldn't do
and of course, with a little bit of a mortgage twist
at the end, discussing whether or not
you should write a subject free offer when it comes
to financing conditions.
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- Okay, so let's get into it.
Let's discuss how to win in a competing offer situation
because in different pockets of the country
competing offers or multiple offers are becoming the norm
and in a lot of cases, you're seeing most properties
that come to the market
getting into competing offers situations.
It isn't something that comes up occasionally anymore.
It seems to be something that comes up
on a very, very, very frequent basis.
So I've got five tips for you on how to win
in a competing offer situation.
Now to give you a little bit of background on myself,
yes, I'm a mortgage broker.
Yes, we deal with competing offers
back in 2006 it was absolutely crazy.
Every single offer that we dealt with
was pretty much a competing offer.
I've also run one of the biggest
independent real estate companies in Western Canada
so I've got a fair amount of experience
in different markets, in different scenarios
where we're seeing lots of competing offers
and I have a few really great tips.
So let's start first and foremost, with my first one
which is to learn as much as possible
about the seller as you can,
because it isn't always about money for sellers
when it comes to accepting an offer.
Sometimes there's other motivations.
So learning as much about them as possible
it can be a huge benefit.
So when you're going through the house look for things
like, is there a kid's toys around?
Is there video games consoles?
Try to figure out how old their kids are.
Try to figure out if maybe they've already started a move.
Maybe they've been transferred somewhere else
in the country, or they bought another house already
or maybe the property is vacant
and they wanna get the property sold.
Try to gather as much information
so you can come up with a strategy to create an offer
that is the most attractive to that seller.
The other thing that you can and should do
is ask your buyer's agent, the real estate agent
that's representing you to go to the seller's agent
and find out what is most important to them in the offer.
Is it the amount of conditions?
Is it the amount of the down payment?
Is it maybe having a certain purchase date or closing date
in order to make sure that they can make
their move happen on time?
Or is it just price?
Find out what their biggest motivations are
and try to tailor your offer
so it is most attractive to them.
Now my second tip is to always find out
how many offers you're competing against
in a multiple offer situation, because here's the thing.
If you're competing just against one other person
then there's a really good chance that you don't need
to write an offer that's way above asking price.
However, if you're competing against ten
or fifteen or twenty other people,
then you're probably gonna to have to pull out all the stops
and come up with your best and most attractive offer
that you can and quite often that means
bidding quite a bit above the purchase price
or above the list price.
Now here's the thing with that
is you gotta make sure that you keep your ego in check
because what can often happen
is sometimes people just wanna win.
So they go and make crazy offers
and pay way too much for a house
and ultimately end up just in a situation that is not good
especially when six months or a year down the line
when the market got a little bit less crazy,
they could have bought a similar house or a better house
for less, or about the same
without taking a big financial risk on a massive offer.
Now the third tip
and this is one of the coolest strategies I've ever seen
is to write an escalating offer
and a friend of a friend of ours used this
on a property at 10 Central Park West in New York city
which is one of the most prominent properties in the world.
He used this escalating offer strategy
in order to basically say to the seller,
I will give you $500,000 over and above
any other legitimate offers that you receive
up to a maximum of whatever amount.
Now this was a $10 million property.
So obviously the $500,000 over whatever
other offers you received isn't realistic
if you're only buying a $500,000 property,
but what you could do is say I'll give you $5,000
over the next highest offer,
up to let's say if the property is listed for $500,000
maybe you say up to $550,000.
Make sure you put a cap on it.
Make sure you have a buyer's agent
that understands how to write this kind of offer
and also make sure your buyer's agent
talks to the seller's agent
and make sure they know how to accept
and receive this kind of offer
and that they're aware that it's coming.
Now the fourth thing you can do to win at a competing offer
is to offer a significantly larger down payment.
Sometimes a down payment or a deposit
shows that you are serious and you can add things
like a financing condition or home inspection condition.
If you're willing to say,
"Okay I'll give you a massive deposit
so that you know that I'm serious.
We wanna make sure that we just have all of our ducks
in a row."
We've seen in certain circumstances
where somebody offered up to half of the price as a deposit
just so that they could go ahead
and make sure that their home inspection
and their financing all checked out.
Really good strategy.
We've recently used this.
We offered a very large deposit on a property
that we were purchasing,
in order to make our offer stand out
so that the clients knew that we were absolutely
a hundred percent serious and we won that offer.
Now the fifth thing you can do
is write with less conditions
and what I'm talking about here
is home inspection conditions and financing conditions.
Now let's talk about home inspection conditions.
Because one thing that you can do with a home inspection
is you can get the property pre-inspected
so you don't have to have a home inspection condition.
Yeah, you're gonna potentially be out $300 or $400
for the home inspection,
but at least you know the property checks out
before you write a conditionless offer.
Now the second piece of this is the financing condition
and this is where I'm a little more hesitant to recommend
to somebody that they go and write a conditionless offer
because this can be one of the biggest financial mistakes
somebody makes
and it's one thing to be pre-approved yourself
and know that you're going to get approved for the mortgage,
but the other thing that people don't consider quite often
is that the property is half of the approval
and a lot of times what can happen is you can get approved
for a property,
but maybe CMHC doesn't like the condo building
that you've chosen
or there's something wrong with the building
and it's been flagged or maybe it just doesn't value out
because you paid too much over ask.
So what you wanna make sure that you do in a scenario
where you're contemplating having a condition free offer
without financing conditions
is you wanna make sure that first and foremost,
your pre-approval, your approval is solid.
So in other words, you've provided all your documents.
They've been verified by your broker or your bank
and that you have a very much a bulletproof chance
of getting yourself approved.
And in a lot of cases you wanna make sure
that you have a backup plan.
So not only are you approved but you have the ability
and the resources to, if the property doesn't value out,
put more cash down than what you had originally planned on.
Maybe you have a backup of a co-signer
that is willing to help you out if you need them.
You just wanna make sure
that you've got all the backup plans.
I would not if I was writing an offer as a 5% down buyer
and I only had 5% down.
I would not be writing a financing free offer
because it is just too risky,
especially if I didn't have any backup plans.
So if you're gonna write without a financing addition
make sure that you have a backup plan and a solid strategy
if something goes wrong.
Now the other thing that I often recommend,
if you wanna write condition free
is to have two pre-approvals.
One through a broker and one through your bank
and obviously you wanna use the one with the broker first
because obviously that broker is going to have more options
and consent to more places if something goes wrong,
but in a worst case scenario if you need to go to your bank
after the fact, you've got their pre-approval
as a backup plan as well.
Now you need to be very careful here,
because get the preapproval from multiple places,
get it from a broker, get it from a bank,
make sure you're covered,
but make sure that you choose only one place
to continue on with the approval with
once you've written an offer
because what can happen is you can have the bank
and the broker both submit it to CMHC in different ways
and it can basically screw up your deal.
So what you wanna do is you wanna make sure
you choose one person to continue on with the approval
and in the scenario where they aren't able
to get you fully approved, then go ahead
and have your bank come in after the fact
or your broker come in after the fact
and see if they can pick up the pieces.
Now in most cases, you aren't going to have a problem
once you've submitted your approval
but it's always good to have that backup plan
and I always think of it from the perspective of,
if I was in this situation what would I do
to make sure that I was covered?
And then I try to give that same advice to my clients
and I try to give that same advice to you,
you my viewers on YouTube
and absolutely if I was going to write an offer
where I had to write a condition free, no financing addition
I would make sure that I had two pre-approvals.
One again with my broker and one with my bank
and by the way, I'd wanna make sure that the broker
that I choose is one who has lots of experience,
has done lots of deals
and knows their way through an approval
to make sure that they didn't miss anything
and that I don't end up holding,
you know an condition free offer that's been accepted
without a mortgage approval.
So those are my five tips for winning
in a multiple offer situation.
Again be careful writing condition free offers.
There's other strategies that you can use
other than writing condition free offers,
like the escalating offer and like knowing the seller
and I highly recommend using those
before writing condition free,
but if you are gonna write condition free
make sure that all of your ducks are in order
and that you've got a very solid pre-approval
and a backup plan in case you get an accepted offer
and can't get a mortgage approval.
If you enjoyed this video do me that favor,
hit that subscribe button, hit that notification bell
and please hit that like button
so more people like you can see this video
and don't forget about our race to 10,000 subscribers.
All you have to do is hit that subscribe button
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We'll see you on the next video, cheers.
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