"Sold over asking" is a common statement in Toronto's real estate market nowadays. "Bully" or "Pre-emptive" offers has become a norm in certain neighbourhoods. This is where buyers do not wait for the offer presentation date to present their offer. They put an aggressive offer earlier to scoop the property. How do you set yourself up to win a bidding war?
Here is a 3 step approach:
1. Qualify for Each Property
Pre-approvals are underwritten conservatively. They are qualified at a higher interest rate with more stringent total debt service ratios with assumptions made on the property taxes at the time of issuing a pre-approval.
1. Pre-approval issued at 2.69% 5 yr fixed (where live deals closing within 30 days can be financed at 2.49% pending applicants qualification).
2. Property taxes are estimated at 1% of purchase price for pre-approvals but in reality Toronto's property taxes are around 0.75% of property value.
3. Gross Debt Service & Total Debt Service Ratios (GDS/TDS) for pre-approvals are more conservative at 32/40, whereas live deals with excellent credit scores & history can be qualified at 39/44.
Prior to putting an offer, we analyze the maximum mortgage amount that can be obtained for that specific property. This helps to establish a budget and ceiling limit for that property. NOTE: Qualifying for a maximum mortgage is one part of the equation, the other is being comfortable with the payment and other household / life expenses. We provide an after tax cash flow to help our clients sleep better at night!
2. Go To The Offer Presentation
We are very surprised how many real estate agents fax in their offers! Get your real estate agent to go to present the offer on your behalf and be close by or very accessible in case of additional rounds of negotiations. We have won multiple offers against 6 other agents because only one other agent showed up!
3. No Regrets
Know your limits: If you would lose the property by $5,000 you will be ok with that the morning after. There will be other ones, not the same but ones that would fit your criteria. Such is life in this crazy hot real estate market!