9. Write it down
When I was first started investing in real estate, I once wrote a letter to a seller explaining why I wanted their property so much – and it worked. So, one of my strongest pieces of advice when it comes to winning a bidding war is to write the seller a letter explaining who you are and why you want their home so much. Buying and selling a home is an emotional time for everyone – especially if a seller has lived in that home all of their lives and raised their family there.
It’s not always about the highest offer; it can also be about the most emotional plea. I can’t tell you how many e-mails I receive telling me that someone was successful in securing their new home because they took the time to explain why it was so amazing in a letter to the seller. While I advise people to keep their letter to one page, one couple I know wrote several heartwarming pages describing everything about the house including memories from their own childhood about the neighbourhood, how they envisioned their family growing up in the house and even how the old pool table and blackboard in the basement would be put to good use.
Despite their offer being significantly lower, the original owners felt a strong connection to their story and decided it wasn’t about the money but about the next generation who would really appreciate a fantastic home.
10. Know when to walk away
We all know that bidding wars can be ugly. With realtors who strategically set the price of a home below market value to instigate a multiple offer situation, it really is about standing firm and not giving in to peer pressure.
Your mortgage, utilities and property taxes and other debts, or what is referred to as your debt-to-income ratio, should really not exceed 30 per cent, but people are paying up to 50 per cent or more of their income towards housing – and that’s too high. I will always say that real estate is a great investment but you have to be smart about it and you do need to follow the rules.
Know your limits, do your research and don’t overextend yourself because it will just take you that much longer to see a return on your investment. Buying a home should not be a competition. It’s not about “winning the bidding war” but about finding a great place to build memories – and equity.
Scott McGillivray purchases and renovates properties, hosts Income Property on HGTV, and launched The Lifetime Wealth Academy in 2010, where he shares his real estate knowledge with would-be property investors across North America.