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How to decide between more than one offer on your house

For most Canadians, selling a home (or buying a new one) is the biggest financial transaction they'll make in their lives. As a result, just when they need to be their keenest and most alert, homeowners tend to be stressed, unsure of themselves and distracted by the implications of moving out of their old digs and into new ones.

According to experts, these shortcomings often come to the fore when sellers must decide between competing offers that have been placed on their homes. A bad decision can mean either tens of thousands of dollars of lost revenue from selling too low or the reverse -- the loss of a potential buyer by trying to squeeze too much out of him.

"When you get an offer, the chips are down," says Jeffrey Stattner, a real estate agent with Groupe Sutton-Royal in Montreal. "You need to keep a cool head. If you let your nerves get in the way, you may not make the best decision."

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It's not just about money
In recent times, Canadian house prices have been strong, with many cities seeing double-digit price increases for several years in a row. As a result, in red hot markets like Toronto, it's not uncommon for sellers to get not just one, but several offers for their property, often within days of the initial listing. So how do you choose the best one?

Experts say money is not always the only consideration. "Normally it would be a 'duh,' situation," laughs Stattner. "You'd pick the buyer who offers the most. But that's not always the right move."

According to Stattner, many offers come with an assortment of conditions and qualifications that could alter the basic financial calculus. "Clauses saying the offer is conditional on a property inspection or the buyer obtaining a mortgage are standard," he says. "But if an offer is conditional on the buyer selling his house, then watch out, because you have no control over that."

Move-in dates can be important
Another key factor in evaluating a purchase offer is the move-in date. If you have two offers on your home that are in the same price range, you'll generally choose the one that has a move-in date that minimizes the time lag between when you move out of your old house and into your new property. Carrying charges on a typical $250,000 Canadian home can cost you thousands of dollars a month if you get stuck juggling two properties.

On the other hand, if a new buyer wants to move into your house immediately, and your new dwelling or apartment won't be available for several months, you could get stuck having to find a temporary residence and end up paying a couple of months of rent. You'll have to factor those costs into your calculations regarding which offer to choose.

Sometimes your heart gets in the way
Another factor that often enters into the picture is personal preference regarding the kind of person homeowners want to pass their property to. "If you've lived in a house for a long time, it can mean a lot more to you than just four brick walls and a roof," says Carole Snow, a real estate agent with Royal Lepage Global in Kirkland, Quebec. "That means selling can be an emotional as well as a financial decision."

Snow cites an example of an elderly couple who sold their home after raising their family there to a couple who visited with their young kids. "The sellers formed an instant bond with the visitors and when they got an offer, they accepted it right away even though there was a second offer on the table and they could have encouraged a bidding war," says Snow. "It's possible the younger couple reminded the sellers of what it's like to be young, and they just wanted to pass their home along to nice people."

What if you only get one offer?
Although the real estate market is doing well, not all listed homes get three or four offers. If your property is in a bad neighbourhood, not well maintained or the local economy is not doing so well, you may only get one offer. But how do you know whether to accept?

One of the most important pieces of advice is that when in doubt, you should listen to your real estate agent. Your agent has likely weathered these situations many times before. He will also have access to a database of recent transactions and will be able to tell you whether the offer is in the ball park by comparing it with other similar houses that have changed hands in recent months.

Studies have shown that real estate agents tend to get better prices when they sell their own homes than they do when they sell their clients' homes. Although there have been numerous reasons citied, one key difference is the "rush factor."

Home sellers typically try to time their home sales with an offer they have made on the next house they want to move into. Once they've made that offer, or have bought the new house, they fall under serious pressure to get rid of the old one. Agents, on the other hand, know to wait for the best offer.

Taking your time can get you a better selling price
One reason that real estate agents do better than typical home sellers is that they don't always jump at the first offer. They tend to keep their houses on the market just a little bit longer to make sure they get the best price.

But that strategy does have its risks. "It's a judgment call," says Stattner. "If you're getting a lot of traffic when you hold open houses and the phone is ringing with interested buyers, it often pays to hang on for a bit. But if you have an offer and you haven't had another call for weeks, you'd better take a close look at it."

Peter Diekmeyer is the Montreal Gazette's management columnist.

 
-- Posted: Sept. 23, 2005
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