We’ve all seen the headlines:
“Home sold $502,000 over asking!”
“House received more than 20 offers.”
“Buyers frustrated with home search.”
There’s no denying we’ve seen unprecedented activity in housing markets across Canada. Home sales have been setting records across the board since last summer, yet we began 2021 with the lowest level of supply on record—below 100,000 listings. Supply inched up in March 2021, but demand also remained high.
Meanwhile, lockdown restrictions and stay-at-home orders due to the COVID-19 pandemic have continued to keep most Canadians at home. This renewed focus on the importance of home, coupled with tight market conditions have been a recipe for unheard of competition, leaving many buyers feeling anxious or frustrated.
“We are seeing multiple viewings and offers within hours or days, houses selling over list price and buyers coming from all over the country and the world,” says Chris Brothers, a salesperson and REALTOR® from Halifax, Nova Scotia.
As a trusted advisor, your knowledge and expertise in real estate is a buyers’ secret weapon to navigating a challenging market.
“Well informed, prepared clients have the power in a competitive market! I feel it is our job as REALTORS® to do our very best to ensure our clients are confident, knowledgeable and within scope—in advance,” says Jennifer Gilbert, a broker and REALTOR® in Lloydminster, Alberta.
“When managing client expectations: tip-toeing, being afraid or avoiding telling a client what ‘reality in realty’ might really be or to hesitate to inform them of alternatives to their thought processes is not the best tactic for anyone. I use my value proposition to create a culture of mutual respect, trust and confidence in myself for my clients before we potentially have to compete.”
Gilbert adds it’s important to have hypothetical, yet realistic, conversations with clients ahead of time. What are they willing to accept? What are they willing to lose? Hash out what they can and can’t remove from the contract based upon their current situation before you start your search.
Conversations with a well-seasoned investor or contractor will be different than those you have with a first-time home buyer.
“It’s a tough market for buyers right now but if they know what to expect during the process it makes it a little less stressful,” says Brothers.
Both agree managing expectations is crucial.
- Encourage buyers to adopt a practical, rational mindset. If they get attached to homes too quickly and then continue to lose bids, they risk emotional exhaustion.
- On a similar note, don’t let them get hung up on missed opportunities. The right home is out there, and you will help them find it.
- Reassure clients. You know the process, make sure you explain it to them every step of the way.
How do you make an offer stand out?
There is no one-size fits all solution in real estate. Every offer is situational, says Gilbert.
“An estate sale or long-time family home will potentially have more emotional attachment where a family value proposition may trump time or money, but in my experience money or the for-certain condition-free deal will generally win over emotions,” she says.
Although it’s not unheard of. According to Global News, one couple in Nova Scotia was able to finally seal the deal on a home after a two-year search thanks to a sweet personal touch.
After losing multiple bidding wars, they secured a home ($50,000 over the list price) with the help of a handwritten letter from their seven-year-old daughter who wanted a place to plant a veggie garden.
“I think the letter did pull on the sellers’ heartstrings because they had multiple offers and I don’t think ours was the highest,” Sarah Moriarty told the Canadian Press.
A couple in Toronto also sold their home to buyers who included a letter and photograph.
“The letter said, ‘We want this to be our forever home.’ Leaving the house to them made me feel really good,” said Brian Sultz told Toronto Life.
That home had 19 offers and sold $545,000 over asking.
Brothers warns this tactic doesn’t always work, citing a recent letter/offer that was rejected.
“Removing waiver of conditions such as home inspection or financing—in some cases these may be a positive in terms of the offer,” he says, but also warns, “and in other cases may cause more headaches in the end. Understanding how to navigate this type of offer is critical.”
Eager buyers may be tempted to waive a home inspection to secure a home, however, there are alternatives to ensure your client doesn’t risk unwanted (costly) surprises. A pre-offer inspection allows buyers to make an educated offer but could mean they lose money if their offer is rejected.
While always a good idea, it’s even more important in the current market to ensure your clients are pre-qualified with a lender. Having your proverbial ducks in a row will make it easier to write an offer when your clients find a house they love.
In Lloydminster however, Gilbert deals with a lot of foreclosure property sales and says banks don’t care about “your story.”
“I would speak with the listing agent, ask great questions, prodding for information and then be an active listener for any cues about what is potentially important to these sellers,” she says.
During your line of questioning you may learn there’s an ideal possession date for the sellers, or you could uncover a pre-inspection has already been completed. You can use the information to your advantage when drafting an offer. Removing barriers and “asks” could also make your offer more appealing.
Gilbert note its also just good practice to build relationship with other professionals in your area.
“Build and foster mutually respectful relationships with other REALTORS®. Be graciously confident in your negotiations and communications so other members look forward to working with you,” she says.
If you’re representing a seller, organizing a spreadsheet to clearly layout different components on different offers can help. This way they can clearly flag offers that don’t have conditions that are important to them.
While “money talks” the best offer isn’t necessarily the highest one.
Keep a pulse on market conditions
Regardless of which side you’re representing during a transaction, it’s crucial you are on top of what is going on in your market. How much inventory is there? What’s happening with price trends?
- The MLS® Home Price Index (HPI) is the most advanced and accurate tool to gauge a neighborhood’s home price levels and trends. The MLS® HPI includes more than 65 local markets and represents more than 80% of real estate activity across Canada. Talk to your local board about getting access.
- The CREA Stats Centre is a one-stop shop for MLS® System statistics, the national news release, aggregate data from the national, provincial and board level, plus more detailed statistics broken down by local areas and property types. It allows members to easily access a plethora of information.
- CREAStats.ca complies and analyzes numerous factors affecting the real estate market including regional demographics, employment trends, consumer confidence and interest rate changes.
Brothers says it’s important to keep clients and potential clients informed.
“I’ve been sending out different postcards letting homeowners know about the market. Our office does a weekly market update called Fast Stats. It shows the number of homes that have been sold, pending and newly listed for the week,” he said.
While there’s no secret formula to winning a bid, this old adage remains true: knowledge is power.