Bidding wars: how to compete without overpaying

In a hot market, several buyers may offer on the same home at once. That pressure can push people to overpay or give up their protections. A plan made in advance helps you stay calm.

The short version: set your maximum price before you see the house, have your financing ready, and be willing to walk away.

Before you bid

• Set a maximum price, based on your budget and recent sales of similar homes, not on how much you like the property.
• Have a pre-approval ready and know how much cash you can use for a larger deposit.
• Check comparable sales, since asking prices in a bidding war are often set low to attract offers.
• Confirm that your financing can handle a higher price, and the appraisal gap if the home appraises below your offer.
• Decide which conditions you can safely shorten or remove, with advice from a lawyer or agent.

How offers are reviewed

Ask your agent how offers will be reviewed and when. The seller may set an offer date and time, and review all offers at once. In some markets, a seller may ask for offers to be held open for a set period. Know the deadline before you prepare.

What makes an offer strong

A clean offer, with a good deposit, a quick closing and few conditions, can be more attractive than a slightly higher price. Other terms can help:

• A larger deposit shows commitment.
• A flexible closing date can suit the seller's plans.
• A personal letter has little legal weight, but may help in some cases.
• An escalation clause raises your offer automatically above others, up to a limit you set. It can win, but it reveals your limit, so discuss it with your agent and lawyer.

The risk of waiving conditions

Waiving conditions is a serious risk. If you waive the inspection or financing condition, you are bound even if problems appear. Some buyers get a pre-inspection or review the seller's inspection report, if one is offered, before offering. If you cannot get financing, you could lose your deposit and face legal action.

Example

A home lists at $700,000 and sells at $760,000 against five offers. If your limit was $720,000, the right move is to submit at or below it and accept that you may not win.

Know when to walk away

If the price goes above your limit, walking away is a valid choice. Another house will come along, and an overpayment can leave you with a larger mortgage and less equity.

Our Property Calculator gives you a reference value to compare with the asking price.

Practices differ by province, and in Québec the process uses a promise to purchase and a notary.