These 5 insider tips from a professional broker will give you a fighting chance in Montreal’s multiple offer real estate market.
Montreal real estate has become hostile ground for buyers. A white-hot seller’s market, a blind multiple-offer bidding process, and purchase prices that often bear little resemble to listing prices make for a perfect storm threatening to send some buyers into eternal rental purgatory.
As a professional residential real estate broker with 10 years of experience, I’ve learned the hard way how to manage – and win – multiple offers. Follow my insider tips to avoid further frustration and win a bidding war.
- Be prepared with your mortgage pre-approval and budget.
Yawn. You have probably heard this one a few times by now, but it bears repeating. Offers without a pre-approval may not even be considered and with many properties being sold days within listing, starting visits without that letter in hand is a waste of everyone’s time.
In fact, your actual pre-approval amount may not be what you expected – it may not even reflect what you know you can afford. Banks see your financial picture in a very specific way.
- Don’t confuse a pre-approval with a quickie online pre-qualification. The pre-approval process involves submitting your tax returns, employment information, and list of assets and debts to accurately determine your maximum purchasing power and budget for monthly costs such as condo fees and property taxes. Get this information together and get started!
- Ask your mortgage advisor to explain incentive programs available to buyers, and think about consulting a mortgage broker who can shop your file around to alternative lenders as well as traditional banks to find you the best deal.
- Send a copy of your pre-approval letter to your real estate broker as soon as you have it, so that it is ready to send out with an offer.
Compare current mortgage rates in Canada here.
- Make viewing properties a scheduling priority.
Everyone is busy. But if you tell your broker you can only do visits on Tuesdays after 8pm, and you’re at the cabin on weekends, don’t expect sellers to bend over backwards to accommodate your complicated schedule.
Listing brokers will aim for maximum efficiency and minimal inconvenience to their sellers when there is high demand, which means limiting visits to pre-arranged periods, typically within the first few days of listing. If you can’t make yourself available during these times, you run the risk of losing out on the property altogether.
Time block an hour on weekday evenings and be available Sunday afternoons to attend open houses, which are often your only shot at seeing a property before offers start coming in. Treat this like a part-time job, it’s important!
If you are a couple, make sure you are both available for viewings. Making your offer conditional on a 2nd visit for your partner to see it will pretty much kill your chances.
- How much is enough? Does asking price mean anything anymore?
Ah, the big question.
Your broker will be able to provide guidance based on recent transactions and insight into the activity level on a particular property, but when trying to figure out how much is enough, there simply is no clear answer. Only one thing is certain – you have to go in with your very best offer.
In many market segments properties are going for 10-20% above asking within days of listing. You must keep this in mind when selecting properties for viewing. If the asking price represents your maximum budget, of course you can try an offer, but be prepared to be disappointed – and try to make the rest of the terms of your offer as attractive as possible (see tip #4).
How do I know if I’m overpaying for this property?
In a perfect world your bid would win by $1 and not a penny more, but let’s face it, it’s impossible to divine that magic number. Even if you discover that your bid was significantly higher than the runner up, remember the other buyers are probably regretting they did not go higher. That “premium” you paid will evaporate soon enough, and you’ll be happy you went the extra mile as you watch prices continue to climb while you stop paying rent and start building equity.
The higher risk for home buyers in Montreal right now is not overpaying by a few thousand dollars, but getting priced out of the market entirely. All economic signs indicate that 2020 will be another record-breaking year for Montreal real estate. TD just reduced their 5-year fixed rate by 35bp, adding fuel to the inferno. When the market eventually does balance out, average sale prices may have settled at another 8%-10% higher, or more in certain segments likes plexes.
If your budget cannot accommodate a suitable property explore more affordable neighbourhoods, or ask a family member to help with the down payment or to co-sign your mortgage (ask your notary to explain the implications of a co-signer). Only you can decide how important acquiring a property is to you and what you are prepared to do to make it happen.
- Make a clean offer with minimal conditions and delays.
In a multiple-offer situation sellers are looking for the best price, of course, but they are also very mindful of how straight forward an offer is.
A great price combined with heavy conditions may be rejected in favour of a lower price with no conditions. Sellers don’t want to risk finding out 10 days after an acceptance that they have to go back to market.
Financing: 10-14 days to submit final mortgage approval
Obviously if you need a mortgage, you can’t avoid the financing condition. Again, that all important pre-approval letter is critical here. Be pro-active in the process. Don’t be shy to check in regularly with your mortgage specialist to make sure they are on top of your file and will respect the deadline. Find out if an appraisal is required. Appraisals are done towards the end of the approval process and must be scheduled with the listing broker, so if left to the last minute they can cause additional delays.
Inspection: 7 days + 4 days to review report
As a broker, I always urge buyers to conduct an inspection and inform them of the risks associated with waiving this condition, such as jeopardizing your legal position should a hidden defect emerge down the line. But ultimately the decision is yours. If you are willing to accept these risks in order to eliminate this condition and make your offer more attractive, it is within your right to do so. In cases where you are purchasing a recently built condo with no declared issues in the seller’s declaration and condo documents, the risks are minimized, especially if the property is under 5 years old and still under a new builder’s warranty. Realistically, in a multiple offer scenario, offers without an inspection condition will have an advantage if the prices are comparable. However, if you are uncomfortable waiving the inspection condition, don’t. Make an informed decision and be fully aware of the risks either way.
Documents review: 4 days to receive documents + 7 days to review
Condo documents include meeting minutes, financial statements, by-laws, and declaration of co-ownership. Ask if your broker can access these documents ahead of time for you to review them in advance and eliminate this condition from your offer, or at least prepare follow-up questions to streamline the review process. For condos, this is often the most onerous condition, so removing that uncertainty and delay is appealing to sellers.
Closing / Occupancy dates, Inclusions / Exclusions; “Sweeteners”
These are items that are negotiated prior to acceptance, and can be important in swaying the seller in your direction.
- Offer the sellers the closing and occupancy dates in the listing, even if not ideal for you. Indicate in your offer that the dates are flexible should their circumstances change, for instance a delay in the construction of their new house.
- Keep inclusions/exclusions as they appear in the listing.
- Offer to pay their notarial fees (up to a reasonable limit), which should be in the $700 range for sellers. Since the notary will likely be buyer’s choice, ask your notary to give you an estimate.
- If the certificate of location is over 10 years old and a new one is required, offer to cover this cost (typically between $600-$900 depending on the property).
- Offer to dispose of furniture they no longer want in order to simplify their move.
These sweeteners may not win the day if there’s another offer that is significantly higher but if it’s a tight race, they can make a difference. The point is you need to throw everything you can at it, especially if you can’t compete solely on price, and don’t be afraid to be creative!
- In case you didn’t get the hint…work with a broker!
If you don’t have professional representation from a broker to help you manage multiple-offer situations, you don’t stand much of a chance in this market.
Brokers will make sure you immediately receive new listings that match your criteria, make sure you get a visit in time, get the scoop on offers coming in, and if they actually pick up the phone to call the listing broker, can get some useful information that may inform your offer.
An active broker will be familiar with the inventory and have the inside track on how well certain buildings are managed or their potential rental income for investments.
And if you think approaching the listing broker directly so they can double-end the commission will give you an edge – you are wrong! A listing broker’s legal obligation is to the sellers and getting them the best price and conditions. In this highly competitive market, you need someone on your side who is looking out only for your interests, who will fight your offer, and make sure you have the best possible shot at winning the bidding war.
Working with a broker is at no cost to buyers. A no-brainer!
In this market there are no guarantees, but by following these tips you can maximize your chances at submitting a winning offer.
If you would like more information on the buying process, or have any other real estate related questions, please contact me – I am here to help.
Happy house hunting!
Jo
Thinking of buying or selling? Curious what the neighbour’s property went for? Write to Jo with your Montreal real estate questions at jsimonetti@kw.com.
Jo Simonetti is a Residential Real Estate Broker with KW Urbain in Montreal, Canada with close to ten years of experience helping buyers and sellers.
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