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Multiple offers can occur when there are several buyers interested in purchasing the same property. In essence, multiple offers are a competition between those buyers to have the home’s seller accept their offer over other buyers. Multiple offer situations typically occur in very active real estate markets (where there are more buyers than properties), or when a highly desirable property is listed for sale.
Buyers competing in multiple-offer situations often look for ways to make their offer more appealing to the seller. Before you make an offer, carefully consider the risks you can encounter in a multiple-offer situation and discuss them with your real estate professional.
Risk: Rushing to make a decision
It can be tempting to rush the decision-making process when trying to buy a home you love, but it is important to take your time and compare your potential home with other properties to determine what is the best fit for you. Rushing to make decisions without enough research often comes from the fear that you will never find another home if you don’t buy this one. These fears can be increased when a seller has indicated that they will review all offers on a set date that is quickly approaching.
Risk: Submitting a subject-free offer
If you are a buyer competing for a property, you may feel pressure to get the best offer written and submitted as quickly as possible. To give yourself an “edge” over other buyers, you may decide to submit a subject-free offer, waiving your right to find appropriate financing or have a home inspection completed. This can be risky, as subject-free offers eliminate your ability to perform any due diligence before buying the home. We encourage all buyers to ensure the home they want to purchase is relatively free from defects, and to line up the best financing, or even review strata documents before purchasing a home. Once a subject-free offer is accepted by a seller, you must complete the transaction or risk a lawsuit.
Risk: Paying over asking price or market value
To make your offer appealing to a seller, it can be tempting to offer more money. While this may secure you the property, a higher purchase price means a higher mortgage payment. It may also mean that your home is appraised for less than you have paid for it. This could make it difficult to recoup your money if you choose to sell the property before the market value catches up with what you have paid for the property. This is also true if the market declines after your purchase, reducing the value of the home.
Before competing against other buyers to purchase a home, speak with your real estate professional to make sure you fully under the benefits and risks of the options available to you.
BCFSA’s Practice Standards Advisors are available to answer questions about real estate transactions and the services to expect from a licensed real estate professional. Get in touch with us, at [email protected].
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