Cass poses a question in another post regarding the hot Saskatoon real estate market. By the time I finished my response I realized that I had written a whole new post so I brought it up front for the rest of you.
If any of my real estate friends have something to add I would really appreciate your input and I’m sure Cass would as well.
Cass said: My husband and I have put offers on 3 different houses and 2 were in bidding wars. The last house we offered $7,000 over asking price and the house went for $26,000 over asking. This house had a basement suite and the buyer came in and paid cash and is most likely using it as full revenue property. This is the 2nd house we lost due to another buyer using it as revenue property. Can you please give us some advice on how a young married couple with a baby on the way is supposed to compete in a market like this? It tends to be very frustrating and discouraging when the houses in our price range are being scooped up by investors, as there isn’t too many decent houses on the east side for around the $200,000 mark. We are fully aware and prepared to place an offer over asking, but how can you compete with someone paying cash?
Norm said: Cass, thanks for stopping. Cash sounds pretty impressive but when I’m reviewing offers it only goes so far with me. The seller is not normally very concerned with how the home is being financed. However, cash offers do often come forward without any conditions attached and the thought of having a good offer completed right now is very attractive to most sellers. One of our sellers just accepted an unconditional offer which was $4,000 lower than the second best. They see some value in knowing that the sold sign goes up right now and that there aren’t going to be issues that have to be sorted out.
Perhaps you could see your mortgage person and tell them that you want to write your next offer without a finance condition. If that person can assure you that you’re good for $225,000 for instance there is probably little risk in eliminating that condition.
Request and review the Property Condition Disclosure up front. It’s always a good idea to ask your agent to “incorporate” the disclosure but if you view the statement prior to writing, you don’t need to include it as a condition.
The biggest gamble is the home inspection. Do you have the guts to write an offer that is not subject to an inspection? It’s a tough call but the truth is that it’s rare that significant problems are found. Most commonly we see busted furnaces, grade issues, and other items which are relatively easy fixes. I don’t ever feel good about suggesting a buyer not have a property inspected, but the fact is this one is always a big concern for sellers, even those who are confident in their property. Do you have someone who could help you do a cursory inspection of a property prior to writing an offer? If you can’t get around this gamble, you might consider writing the home inspection condition in a different way which would allow you to back out if major problems are discovered but also provides the seller with assurance that you aren’t going to nickel and dime. “This offer is subject to a professional inspection of the property to determine structural integrity of the improvements. The buyer agrees that they shall have no right to rescind this offer for discovery of defects which do not exceed (insert amount here) in repair costs.”
Conditions like “satisfactory gas line inspection” or “review of local bylaws,” etc are bound to doom your offer. Do your homework in advance.
Scrape together as much money as you can for a deposit and show the seller your good faith. A $10,000 is a strong sign and it’s totally appropriate in this market.
Try writing the seller a personal note to include with your offer. Let them know who you are and how much you love their home. Tell them that you are very confident in the house (if you are) and how much you look forward to raising your family there. Ask them, “Is there anything else which we can do to have you favour our offer? We are open to discussing ways in which we can come to agreement. We really want to make your house our family’s home. We are available at a moment’s notice to address any concerns which you may have.” Place the note in an envelope with the seller’s name on it and enclose it with the offer in another envelope. Have your agent deliver it to the house when offers are presented. Go with him. Wait outside in the car. Be sure that the seller’s agent knows you are there; ready to deal with issues which concern the seller.
All other things being equal, most sellers would prefer to see their home go to a family instead of an investor. Try to use that to your advantage by giving the seller a little insight into who you are.
Good luck. I really hope you get the next one.
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