In a hot market like the one we’ve had here in central Toronto for the past several years, a lot of buyers have hard times finding homes to buy. Because demand is stronger than supply, there just aren’t enough homes to go around. This has resulted in some buyers (often with the help of  their Realtors)  trying to buy homes that aren’t listed.

The private offer process usually starts with a phone call or letter that goes something like this: “Hi, I have buyers who are interested in buying your home. Please contact me in full confidence if you’re interested in selling.” OR “Hi, We’d like to buy a home in your neighbourhood and really like the look of your home. If you’re considering selling, we’d appreciate it if you’d give us a call.” OR “Hi, Our mutual friends told us you might be listing your home soon and we’d like to buy it before you put it on the market. Can we talk?”.

Have YOU ever received a letter or phone call like this? If so, you’re not alone. These days, they’re  being doled out like candy on Hallowe’en.  Most of the time, these conversations lead nowhere, but once in a while they lead to an offer. If you should happen to be one of the few people who receives a private offer, how will you know if you should accept it or not? Well, start by considering these things:

• Are you really ready to move? Where will you move to if you sell?
• How good is the price? It may sound good to you, but until you know the fair market value of your home and the premium price (the top price you could possibly achieve in a multiple offer situation), there’s no way to determine if you’re better off selling privately or putting your home on the market to get a better price.
• Are you willing  to accept a lower price to avoid the hassle of putting your home on the market?

Whenever the subject of private offers comes up, I’m reminded of the story a friend of mine told me regarding his parents. Out of the blue, someone offered them $2m for their home when they weren’t even thinking of moving. They were astounded by the price and accepted the offer without thinking things through or doing any due diligence. They consequently found out that there wasn’t anything suitable on the market they wanted to buy and had to wait 2 years for something to be built for them. During this time, they moved around from place to place (relatives, cottage, etc.). And, to top it all off, their new place cost the same as their old place so they didn’t even make any money on the deal. They’re very smart people, but they would have been smarter to do their due diligence before deciding to accept the offer.

Don’t let the dollar signs in a private offer get the better of you. (If they do, you’ll have no one to blame but yourself because you’ve already read this article.) Before you decide to accept a private offer, make sure you do your homework. You need to be ready to move and have a good idea of where you’ll move to and how much it’ll cost you to do so. Perhaps most importantly, you need to know the fair market value of your home to determine if  the private offer is  even worth considering. After all, your home isn’t on the market. If you’re going to sell, the price has to make it worth your while to move. I’d even go one  step further and suggest that you not sell unless you receive a premium price because by accepting a private offer, you’re giving up the opportunity to list it for sale, receive multiple offers and receive that premium price. You shouldn’t be disadvantaged for giving a buyer the opportunity to buy your home when it’s not  on the market. No matter what happens, it all begins with how much your home is worth, which is why the first thing you ought to do is check out Understanding Prices – Master Class.