Buying a home can be a long and arduous journey, especially if it’s your first time.
This is especially true in a hot real estate market, where demand for homes is high and supply is tight. In the pursuit of your dream home, emotions run wild, and the fear of missing out can loom large.
In this guide, we’ll explore how to create a compelling offer and emerge victorious, without compromising your sanity.
Some factors that can make your offer stand out
Here are a few tactics to make sure that your offer stands out in a competitive real estate market:
Get pre-approved for a mortgage
Pre-approval can speed up the mortgage application once your offer is accepted. As a buyer, having a pre-approval gives you a realistic idea of how much you can afford, and it reassures the seller that you won’t withdraw due to financing issues.
Additionally, pre-approval locks in the current interest rate for up to 120 days which allows you to shop confidently, knowing you’re protected from rate increases. If rates decrease, your lender should honor the new lower mortgage rate when you’re ready to proceed.
Provide wiggle room with scheduling
Being flexible with timing shows consideration for the seller. Propose a closing date that aligns with the seller’s needs (e.g., avoiding holidays or special occasions). You can also offer a longer or shorter closing period to accommodate the seller’s moving plans.
Increase the deposit amount in your offer
A deposit is an upfront payment made by the buyer to demonstrate your serious intent to purchase a property. When you make an offer on a house, the deposit amount is included in the purchase agreement. Once the deal closes, the deposit goes toward your down payment.
Typically, you’ll want to include a deposit of at least 5% of the purchase price, however, the higher your amount, the stronger your offer will be.
But there’s a risk: Changing your mind after making an offer will not only result in losing the deposit but also bring forth a potential lawsuit for any damages suffered by the seller.
Consider removing some contingencies in your offer
When you decide to remove contingencies from your real estate offer, you’re shifting the risk from the seller to yourself as the buyer.
Contingencies are provisions that allow homebuyers to back out of a deal under specific circumstances (e.g., failed home inspection) without losing your home deposit. Without contingencies, you commit to the purchase without a safety net if things go wrong.
While eliminating contingencies can make your offer more attractive, hidden defects could easily turn your dream home into a nightmare. Striking the right balance between risk and reward is key.
Write a personal letter to the seller
Lastly, if you know you’ve found the home of your dreams, it wouldn’t hurt to share your story, express why you love the house, and try to connect with the seller on a personal level. There’s a chance that they may choose a buyer who truly appreciates their home over a slightly higher offer.
Read more: How to deal with the pressures of homebuying
Submit an all-cash offer
When available, sellers tend to prefer cash offers. These offers tend to close faster so there’s no need to wait for mortgage approvals or appraisals and there's less chance of the offer falling through due to financing issues. This is particularly helpful for newcomers who have saved up for a move to Canada.
Purchasing a home outright can help negate the complicated process of qualifying for a mortgage with limited work and credit history in Canada, and the potentially higher interest rates associated with those risk factors. However, if you do choose to purchase a home with cash outright as a newcomer, be prepared to provide proof of where the money came from.
What is a ‘sight unseen’ offer, and can it make your bid more competitive?
Buying a house “sight unseen” means purchasing a home without physically touring it or setting foot on the property. Instead of an in-person visit, buyers rely on online photos, videos, and virtual tours to evaluate the property remotely.
While the COVID-19 pandemic enabled and popularized remote home buying, it’s also useful for homebuyers who are moving in from a different city, province, or country.
For obvious reasons, there’s bigger risks associated with these offers. When you buy a home without seeing it firsthand, you’re not able to assess its condition personally. There could be hidden defects, structural problems, or maintenance issues that aren’t apparent from photos or videos. (For this reason, even if you’re not able to visit the home in person, you should make sure you have a trustworthy home inspector and real estate agent to inform you of what you’re getting yourself into).
Some sellers may not even accept sight-unseen offers out of fear that the offer will fall through once the buyer steps into the house. If that’s the case, you may be able to sway them with a bigger deposit or an all-cash offer – but again, the risk will fall entirely on the buyer’s shoulders.
Tips to keep in mind when submitting your offer
Buying a home is a significant milestone, and a stressful one. Your offer isn’t just a casual proposal—it’s a legally binding document that sets the course for your homeownership journey.
Seemingly minor details can ripple through the entire purchasing process and continue to impact you long after you’ve moved in. To navigate this complex terrain successfully, here are five things to keep in mind:
- Make an effort to understand the local real estate market, property values, and neighborhood dynamics. Knowledge is your best ally.
- Recognize that your offer carries legal weight. Seek professional advice from a real estate expert to ensure your rights and obligations are clear.
- Have a good team that you’re confident in. Partner with an experienced agent and mortgage broker who knows the market, negotiates well, and has your best interests at heart. An excellent lawyer will review contracts, safeguard your rights, and guide you through legal intricacies.
- Include relevant contingencies in your offer. These protect you in case of unforeseen issues (e.g., home inspection findings, financing hurdles).
- Remember that homeownership extends beyond closing day. Consider factors like property maintenance, taxes, and future resale value.
By working closely with professionals and paying attention to details, you’ll set yourself up for a successful home purchase. Happy house hunting!
Read next: What is a First Home Savings Account (FHSA)?
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Here at RATESDOTCA, we compare rates from the best Canadian mortgage brokers, major banks and dozens of smaller competitors.
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