How do you “win” in multiple offers?
Well, having an unconditional offer is a pretty good start, but of course, the money has to be there as well.
In the case of condos, many buyers are omitting the traditional condition on status certificate.
With every potential reward, come some potential risks as well…
I’ve always hated the term “winning” when used in the context of being involved in a multiple offer situation. Of course, the “mutliple offer” situation could also be referred to as a “bidding war,” which I also don’t like.
I’ve always maintained that the terms are synonymous, but the later takes on a negative conotation.
Nevertheless, if you’re looking to “win” or just “be successful” in multiple offers, there are a couple of new tricks that buyers and their agents are using.
I don’t think a lot of deals fall through in our city, but there are the odd buyers that can’t obtain financing, or the odd lawyer who studies the Status Certificate and raises a few red flags. In the case of a house, maybe the home inspector finds some glaring deficiences and the buyer chooses not to move forward.
Whatever the case, when you are in a multiple offer situation, it’s best to have a “clean” offer.
I’ve found in the past five years that when a house receives multiple offers, there are rarely conditions involved. Most buyers do a home inspection in advance and secure a mortgage pre-approval so that they can go with an unconditional offer.
However during the same time period, it’s been essentially common place for offers to be conditional on Financing and Status Certificate in the case of condos receiving multiple offers.
Of the hundred-some-odd condos I have sold, not a single one has ever fallen through because of a red flag in the Status Certificate.
In fact, I think the whole exercise is generally futile.
Nevertheless, because it is “generally” futile and not “always” futile, we still have to pay $100 for the Status, and then pay a lawyer to pretend to read the damn thing…
On Monday evening, a client of mine was involved in multiple offers at 230 King Street, and we “won” in a field of nine offers. As I told my client, “If there are really NINE offers, and there are eight other ‘losers,’ you should sleep well knowing that your new condo is exceptionally popular and extremely saleable!”
But we weren’t the highest priced offer!
I happen to live at 230 King Street so I know the financial statements almost by heart. I know that there is a healthy reserve fund, the management is above-average, and the Board of Directors hasn’t made a bad decision since I’ve been here.
I also happened to refer my client to my own mortgage broker, and I know that he was pre-approved for well in excess of the purchase price of this condo.
So what point would there have been in us submitting a conditional offer?
We went in unconditional, and the listing agent and his buyers wanted to work with ours.
We weren’t the highest offer, but we were given an oppurtunity to match the highest offer, since those people refused to waive their conditions.
So what is the advantage to the seller of accepting an unconditional offer as opposed to one that is conditional on Financing and Status Certificate?
Well, obviously there is no chance of the deal falling through if the deal is unconditional, but personally, I believe that sellers in this market place are chasing immediate gratification.
I know all about immediate gratification. It runs in my family.
When we first moved into our house twenty years ago, my Dad insisted that the landscaper plant fifteen trees where six would have done just fine. My Dad wanted a “treed yard,” but the landscaper maintained that the trees “needed to grow in over time.” That just wouldn’t do, so at the risk of the trees dying or killing eachother for space, ten years down the road, fifteen trees were planted and immediate gratification was gained.
Condominium sellers don’t want to wait upwards of two full weeks to “firm-up” the sale of their units.
They want immediate gratification.
They don’t want to wait five business days for the seller to obtain financing.
They don’t want to go through the formality of obtaining a Status Certificate within ten days of the agreement date, and then passing it on to the buyer so that the lawyer has three days to review it.
They want to sell the condo FIRM the very day that pen is put to paper, and end it right then and there.
An unconditional offer has become a hot commodity, which is ironic considering that the market is red-hot and there shouldn’t be any trouble selling houses or condos.
One might think that an unconditional offer would be the hottest commodity in a marketplace where deals routinely fall through, like south of the border as I described last week.
But again, last night, a colleague of mine was successful in multiple offers for a two-storey unit on Front Street because her client was willing to waive her conditions on Status & Financing. She beat the highest offer by $100, which was a very cheeky move by the listing agent (to actually tell my colleague the price and allow her to beat it by such a fraction; this is beyond grey area – it’s not allowed!).
In the end, it is the buyer’s agent that takes on all the risk, since they will be held responsible if anything goes awry.
The listing agent can’t legally advise the selling agent and his/her client to waive the condition on Status Certificate (the listing agent in my dealing above didn’t because we were already unconditional, but the listing agent in my colleague’s situation DID despite the illegality), so it falls on the buyer’s agent to make the decision.
What could go wrong?
Well, there could be a huge special assessment pending in the building, which is something that a thorough review of the status certificate might have caught! The buyer’s agent could be held accountable and made to pay the assessment!
There could be a lien against the unit if the owners hadn’t paid their maintenance fees or maybe had a destructive party in the party room and were billed for damages.
Maybe the reserve fund was dwindling or the condominium corporation was running a budget deficit.
Any of these examples or countless others are reasons NOT to go into a multiple offer situation without a condition on Status Certificate.
But, what if the condition will cost you the property?
Does the adage, “Better safe than sorry” ring true here?
Or is it more of, “You have to gamble to win?”
It’s a toss-up, but one that the buyer has to be comfortable deciding for him or herself.
My feeling is that if you do your homework in advance, you gain a leg up on the competition by having the flexibility of going in unconditional.
If you’re willing to do a little legwork, it may net you the sought-after property that has received multiple offers.
If you don’t, then keep on looking with the rest of the crowd, because unconditional offers are where it’s at…