If you’re buying a home in a hot real estate market like the one we have in central Toronto right now, you should be prepared for multiple offers. Because there are more buyers than sellers, it’s not uncommon to find yourself up against other buyers when you find a home that you like, especially if it’s a good home, in a good location and well priced.

There are two primary and conflicting issues to be concerned with when you’re in a multiple offer situation. First, you want to get the house. Not only because you love it, but because you don’t want to have to continue looking at and bidding on other houses. Second, you don’t want to overpay because you may not be able to get financing if the house doesn’t appraise and you don’t want to take a loss if the market softens.

So what you should you do? Here are 5 tips to help you get the house AND not overpay:

1. Do your research so you’ll be able to judge the approximate fair market value of the homes you’re seeing. Your Realtor should be able to help you with this. For example, when you see a home that’s listed for $799,000, both you and your realtor should know whether it’s true value is $799,000 or $900,000. This will help you determine if it’s even worth submitting an offer in a multiple offer situation. There’s no point wasting your time and setting yourself up for disappointment if your budget is well below the true value of the home;

2. When you see a home that you’d like to buy and find yourself competing against other buyers, determine your top price before you submit your offer. This will help prevent you from getting caught up in the heat of the moment and overpaying. For example, let’s say you see a home that’s listed at $799,000 and that’s worth $850,000. You decide to offer $875,000 because this is the home of your dreams, you’ve been looking for 2 years, you’ve lost out on 5 other homes, you’ve been living in your in-laws’ basement for 6 months and you’re expecting your first child next month. In a case like this, it’s okay to pay a premium above fair market value, but make sure you set a limit on your price before you’re in the middle of the bidding process. If you get carried away and pay too much, you run the risk of the home not appraising, you not getting financing, you not closing, you getting sued…let’s stop right there. Just determine your top price in advance;

3. Don’t let anyone pressure you into doing something you’re not comfortable with (like paying too much, closing too soon, accepting defects in the home…). It’s your money and your home and you’re the one who has to live with your decision;

4. Be patient and don’t get stressed (see Real Estate Yoga).  There will always be another home. If it’s meant to be, it’s meant to be. (I could tell you that all of my clients who have lost out in bidding wars over the years have ended up buying homes they loved even more than the ones they didn’t get, but I wouldn’t want to jinx this streak.) At the same time as you’re being patient, though, it’s important to keep your eye on prices. Some price increases are temporary and can be waited out, but some may be permanent. If the increases are temporary, prices usually normalize after all the desperate buyers have bought.  If they’re permanent, you could get priced out of the market so you’ll have to decide if you’re willing to adjust your price range, lower your expectations, jump in with a splash (and a big price) or be prepared to wait for prices to soften; and

5. When you DO bid on a home, increase your chances of success by following the advice in Win the Bidding War!

Several years ago, clients of ours bid and lost out on 12 homes in a row. Their offers were all reasonable so this was unusually bad luck. But they didn’t get stressed. They kept calm and carried on, knowing that their turn would come. And come it did. Offer number 13 was on the best home of all. It was priced similarly to all the other homes, but for some reason, their offer was the only offer so they got the home for list price. Good things come to those who wait.

If you have any questions about what to do in a particular situation, and every situation in real estate is particular, don’t hesitate to ask me. I’m happy to help!