By Ross Wilson

“You have to learn the rules of the game. And then you have to play better than anyone else.” — Albert Einstein

In an ideal world, your buyer is the only bidder on their dream home. However, unless all the planets are impeccably aligned and you’re in the midst of a balanced or buyers’ market, you and your buyer may find yourselves in the unenviable position of having to compete with another anxious buyer (or several) who shares your client’s ideal of what constitutes a dream home. When should you encourage your buyer to walk away from a war? Does the procedure involve a logical strategy for buyer or seller, or does it all boil down to gut feeling? How can a seller maximize the benefit of a multiple bid?

When accepting a listing, experienced agents are aware that there are two basic options. The traditional conservative approach involves establishing a reasonable asking price marginally higher than perceived fair market value. Individual offers ensue and are presented on a first-come, first-served basis. The other more aggressive approach normally requires not only a market wherein buyer demand excessively exceeds supply, but also the trifecta of a suitable property, a mutually trusting agent/seller relationship and nerves of steel.

To incite a competition and hopefully generate great terms for your seller, list at or below fair market value. The remarks section of the MLS system listing should include a specific date and time, usually a few days after the listing is uploaded, when all offers will be presented to the seller during the same assembly. This hard-hitting option permits all interested buyers and their agents with the chance to be notified of and, like a furniture auction preview, leisurely view the listing prior to presentation day. It also affords the interested parties the time to improve the attractiveness of their upcoming offers by fulfilling any conditions in advance.

Offers can then be submitted without the typical frenetic feeding flurry on the day the listing appears. It can be a more civil procedure for obvious reasons, and certainly great for a homeowner, but the competition is often a nightmare for anxious buyers and their agents. Be careful with this marketing method, though, because it can backfire. If you don’t have an appropriate property during the right market conditions, the result can be a sale price below market value – and an unhappy seller.

Before your buyer even begins to view property in a competition-prone market, they should confirm – in writing – their ability to finance a purchase by seeking an unconditional pre-approved mortgage. A good practice anytime, but it’s particularly so when competing. Insist on an approval letter that doesn’t just state they’re approved subject to confirmation of employment, down payment and credit report. If you can assure the seller and their agent that the financing condition is a mere formality and that your client has been unconditionally pre-approved – and you can prove it – you may be in a stronger bargaining position.

Depending on circumstances, to enhance the attractiveness of your client’s offer even further, you might exclude the financing condition. However, if your buyer elects to include it, during the negotiation, clarify to the seller that only their property must be approved by the lender by way of a realistic appraisal. If the lender thinks the buyer was overly generous and they have a minimum down payment, the buyer had better have more cash in the piggy bank. The loan may be approved, but at a lower principle amount because the purchase price excessively exceeded the lender’s appraised value. Arguably, though, the best reason to seek a pre-approval before entering a bidding war is to confirm your buyer’s absolute maximum affordable price. Then, they can’t go nuts in the heat of the moment. Reasonable heads may then prevail.

To avoid further conditions, your buyer could arrange for technical inspections to be performed prior to the offer presentation date. It means upfront fees for a potentially losing bid, but as they say, better safe than sorry. Unless your buyer’s offered price is exceptionally higher than a competitor’s, or all competing bids include the same condition and the seller is confident that their home will easily pass an inspector’s scrutiny, the seller is unlikely to even consider accepting such a condition.

It’s really easy for a group of competing buyers sitting on the edge of their seats to agree to pay an unreasonably high price which, under calmer circumstances, would be considered ridiculous. Winning the bid may be emotionally satisfying, but from a money perspective, it’s crazy. Leave impulse shopping for the grocery store check-out. If their emotions get the better of them, they may ultimately buy a lovely home, but at an exorbitant price.

To get the best possible deal, they must steer clear of emotionally attaching to a particular outcome – or property. It can certainly be exciting at the time, but also painful if they lose a bid – or later when they realize they grossly over-paid. Tell them to be cool. If they’re successful, that’s great; celebrate. If not, then at least they tried. Move on. There’s always another house. It’s just sticks and bricks.

In the next of this three-column series, I address what I feel is the best practice for buyer and seller agents to follow during a multiple bid scenario.


  1. Ross, IMHO, you are setting Realtors and buyers up with the expectation of being able to obtain an unconditional mortgage pre-approval. Although many professional mortgage brokers do their best to obtain supporting documents upfront and pre-underwrite, there are no lenders in the marketplace that will provided an unconditional pre-approval, let alone a true pre-approval at all. Most lenders including banks will only provided nothing more than a rate hold subject to….. Even in the event of a full mortgage commitment after purchase, there are no guarantees of funding, right up until closing.

    My recommendation now to Realtor partners as it was when I was a real estate broker, is to ask clients if they have a “Plan B”. In other words, should you not get financing through normal channels do you have a 100% fallback plan in the form of 100% cash, parental assistance, private funding, etc.

    There is no replacement for a condition of financing in an offer to purchase. Leaving it out or recommending not to include it is a slippery slope fraught with liabilities.

    • Ross’ articles are powerful and clearly represent his long and prodigious career. In regard to transacting with no subject to finance clause at all, it can indeed be a slippery slope. It can be done, but would require a liability disclosure and release, signed by a buyer, removing the possibility of involving an agent in a subsequent lawsuit; stating that the buyer elected of his own free will to proceed without the finance clause. If the transaction fails to complete for unknown at the time, reasons.

      I speak to this only having researched as best as is possible over the years, acting on behalf of a buyer. But acting on behalf of a buyer is only half the issue. You could be representing a seller, and find yourself in the position of advising whether or not to accept a clause-free offer from a buyer, who unknowingly makes a firm and binding commitment, not realizing or understanding fully the contiguous procedures involved in getting to being provided the keys.

      I agree that right up until closing day, funds to be provided by the lender, to the closing law office are not guaranteed. There’s sometimes absolutely nothing agents can do to control the outcome.

      The buyer in the interim between having an APS agreed to by all parties subsequently might have committed the faux pas of having gone out and bought a new car on credit, or bought a host of new appliances for the new house, using his credit card or power line at the bank, whether or not his mortgage was coming from that bank, thus upsetting his balance of power, credit wise, suddenly upsetting the pre-approved for mortgage scales.

      Often mortgage brokers or bankers do not explain these possibilities or warn buyers of these sorts of debacles.

      That’s just one reason in my lengthy productive career, I never took on the obligation of pre-approving buyers, even in the most general sense. I always insisted they provide to me, documents from their mortgage broker or bank, that I could call upon if requested by the seller or his agent as some sort of fallback protection. Not only that, but such documents created a comfort zone for me, as to whether I would even entertain showing listings to this possible buyer, right from the get-go. As stated in another person’s comment, our time is valuable. Personally I have never experienced multiple offers the likes of which have been seen in recent times. Most I ever had to deal with were four multiple offers. One of which was my own, and the manager of the day refused to participate. So I handled it as professionally as I knew how. I let the paperwork do the talking, and precisely explained what was happening. (We were still practising sub-agency, mid 1980’s.) It was an interesting experience because two of the offers were from my own office of the day, the other from another company. Outside the house when all was said and done, the colleagues involved congratulated me on how professionally the complicated situation had been cared for. I appreciated that, for sure. It could easily have turned ugly. I did everything in my power to see that everyone was treated equally. The only way to fly and land safely.

      But after every consecrated transaction, I did stay in touch with everyone involved, including the law offices, after the accepted APS was in place. It’s called follow-up and follow-through. Just one more procedure in the agent to-do list after the sold sign goes up.

      Off-topic: I expect this subject might have been in the minds of TREB vis a vis exposing sold price and privacy information? that might affect a further purchase when a transaction falls apart? Just thinking out loud.

      In later years, I also had my buyers sign a liability disclosure protecting me, that I put a copy of with the pre-approval documentation, stating that I had had no part in officiating the pre-approval diagnosis or process.

      It would be wise for mortgage brokers and or bank mortgage department people to take the time to give a lesson to their own customers/clients about such backup plans, and advise about possible genuinely not knowing or understanding over exuberance in celebrating their house purchase.

      Truly, people just don’t know some of these things that teeter-totter their credit scores, making for sometimes giant closing day pains. And some buyers legitimately do not have the power or opportunity of a backup plan. It is always safe to err of the side of caution. If the buyer happens to think you are being negative rather than businesslike, education again bespeaks. Fix it before it’s broken is often a good concept.

      So, although there is never a sure-plan, in an effort to protect everyone involved including the agents, the brokerage, as well as the seller and buyer, it costs nothing to allow a clause of brief duration, perhaps three business days, first off to get an official appraisal. But the appraisal only speaks to value of the property on the day the appraisal was written. A appraisal does not address financing, or the condition of the property typically. But neither speaks at all to the last minute checks the closing law office does.

      And, that brings up thoughts on long closings, particularly outside a 90-day commitment. Markets can change in a heartbeat. And that, too, can have a remarkable effect on closing day. Note that mostly a mortgage commitment comes with a date deadline. If closings for whatever reasons are extended even a matter of weeks, the whole attached string can tangle or topple.

      That’s just one reason law offices don’t give out keys even hours prior to closing, and why often it could be wise to suggest bridge financing for a few days if more than one closing is contiguous with a string of closings one tied to the other. If one property closing goes askew, the likelihood of a chain reaction is clearly possible,

      Sometimes the public thinks we don’t earn the commissions we are paid, but they often have no clue what goes on behind the scenes. That’s not their fault. It’s ours, combined with the chain of command, not having educated our buyers and sellers in each transaction in particular. It’s no time for supposition or presumptions.

      We as agents are under contract and have a fiduciary obligation to do all in our power to protect everyone involved. Sadly no matter what we do, it’s sometimes never enough. And some people just don’t listen. As the old saying: you can lead a horse to water but you can’t make it drink. Regardless of the trifecta involved.

      Just a bit of fun, Ross… Are you aware that word “trifecta” was allegedly only coined in the 1970’s? relative to some sort of horse-betting procedure? I know from nothing about horses in reality, except that like a dog, they have four legs and a tail, but that horses require different barn flooring than cows do.

      Aren’t we fortunate in the Province of Ontario that agents are not permitted to register closings. Only a lawyer can. So in some respects that takes the liability off the agent-world. Probably a good thing. Can’t begin to compute the procedures our business compatriots south of the border are required to take on that liability.

      However, the agent responsibility clearly remains in the getting of the procedures in place prior to the last hour of closing, so that the transaction doesn’t come back to bite us. If you don’t follow-up and follow-through you might find your commissions being allocated to complete your client’s closing. And that would be a gentle process compared to what might be.

      Carolyne L ?

      • Thanks, Carolyne, for your comments. Solid advice as usual. And I used the word “trifecta” rather loosely to represent the result of 3 elements aligning. President George Bush allegedly said, “Lucky me, I hit the trifecta,” in the immediate aftermath of 9/11, according to his budget director. Sadly, his trifecta consisted of war, recession and national emergency, which he saw as a golden opportunity to soar in the political stratosphere. His comments, along with numerous credible studies, lead many to believe that he was involved in the conspiracy behind the attack.

        • Oh, my, Ross. I am totally apolitical, although American politics sometimes produces interesting headlines.

          My point of reference was purely linguistic fun, since we older folks might know such unusual words perhaps but the younger generation might not. Or of course the reverse could apply.

          Carolyne L ?

    • Thanks, Steven, for your comments. Since I’ve not recently consulted with every local lender, you may indeed be correct. However, seeking a pre-approved mortgage is still a wise step for a buyer prior to even beginning a home search, let alone entering a bidding war. A pre-approval amount only represents how much a lender will approve for a buyer in general after the lender has reviewed income, debt and credit report information. It obviously doesn’t approve the property since inherently, it has yet to be determined.

      Of course, obtaining a pre-approved loan commitment doesn’t guarantee that a buyer’s final loan application will be approved, but it goes a long way to protect the buyer (and the agent). After the dust settles and a buyer wins the competition, the lender reviews the property and APS details to determine if it meets their policy criteria. Obviously, the property must be appraised to ensure that the loan to value ratio is not out of whack, and that the building does not have, for example, asbestos or knob and tube wiring. If all is not deemed satisfactory, even though the buyer performed their due diligence and obtained a pre-approval, the lender could still deny the loan.

      My point was that, due to the substantial financial risk associated with such a decision, buying a home without a financing condition (or a home inspection) is definitely not a wise choice. Nevertheless, in today’s hot market, it has become a regular occurrence. Seeking a pre-approval can reduce that risk just a little.

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