A home I tried to buy was sold to someone who offered less. Doesn’t the seller have to accept the highest offer?
The simple answer is no. Once sellers are presented with written offers they are free to choose one of them, reject all of them, or make counter offers.
There is no obligation to accept the offer with the highest price. In fact, the seller is not obligated to accept any offer.
Even if a competing offer includes a lower price, it might be more attractive for other reasons. For example, the seller might be tempted to choose an offer that doesn’t include a financing condition, or the offer they choose might have a closing date that works better for them.
Price is just one factor for the seller to consider.
Of course, most transactions don’t play out that way, so I’d like to provide some tips for navigating a multiple offer situation (also known as a bidding war).
Planning ahead is important so that you’re prepared for a process that can often be fast-paced, and emotional.
Whenever you’re putting together an offer, it’s best to keep a level head. It’s important to set a budget ahead of time, and stick to it.
You might also be tempted to put in a bid without home inspection or financing conditions to make your offer more attractive. This is a risky proposition. If there’s no financing condition, you could lose your deposit if you can’t get the funds to complete the deal. And without a home inspection condition, you could be on the hook for costly repairs down the road.
These are serious risks, and you should make sure that you understand the trade-offs before you leave these conditions out.
As the summer heats up, the housing market is showing some signs of cooling. This may reduce the number of bidding wars, but it likely won’t eliminate them.
Try to keep your emotions in check, and understand the potential risks of the strategy that you take. Your broker or salesperson can be a guide throughout the process.Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.