The Marginal Buyer - "A take on the competitive nature of multiple offers."

You win some... You lose some. That's the tale of the Toronto market for buyers. Though lately we've been winning a lot. Very proud to know that we've been able to help 6 families purchase in the last 45 days in multiple offers. Many of them have lost in multiples over the past 3-4 months. Many buyers out there know the heartache and the agony of defeat. In the past year, we've worked on a strategy around what we call the

"marginal buyer"

In our buyer process, we level set all of the expectations around a multiple offer situation based on "the marginal buyer". You see the marginal buyer is our only real competition. The marginal buyer is our neck and neck stiff competition. Some of the key characteristics of the marginal buyer: 

 

  • knows values in the area
  • knows absorption rate in the area
  • can define whether the area is a sellers market, buyers market or balanced market
  • is intimately aware of recent sales
  • understands all elements of an offer
  • comes equipped with pre-qualification and if possible pre-approval for financing
  • understands all 9 elements of a home inspection
  • has thorough knowledge of the condo/strata declaration and status certificate as applicable
  • comes with a deposit to the offer (don't ever walk without a deposit!)
  • has a strong guide on the purchase process
  • has a guide who can advise on future value albeit without the ever-valuable crystal ball.

The marginal buyer is our stiff competition because they are the most aware of the cost-benefit of buying a particular property. Once we've scoped out our competition, the next step is to analyze the "logical" approach to historical and current data. Then... and only then... comes the all important question:

"How much would be too much? And if this property sells for too much, would you buy it for that price?".

Interesting situation right? Only in Toronto is this how purchases are qualified. Here's another way to look at it:

"With prices climbing at x% per month... would you be willing to pay what this home will be worth in 1-2-3-4 months?"

Finally, here's how we usually set up the conversation:

Based on current data of inventory, market dynamics and recent sales, the property is:

a) a steal at X dollars

b) a deal at y dollars

c) you're overpaying at z dollars

After we've examined it, the only last step is to figure out whether the marginal buyer is likely to offer more then us. And if they are, we have to answer whether we are ok with it. 

And guess what... if you've offered and won.. based on going through the exercise and homework above, that's right, you've guessed it... YOU ARE the marginal buyer. And congrats, you've just bought a home in this crazy Toronto real estate market.

NB: Justin, Sarah and Alicia have all bought homes in multiple offer situations. We don't just preach it, but we practice it too!

Want to talk Real Estate? Got questions... call/message any time!

Ravi Singh

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Ravi Singh was named one of the most Interesting People in Real Estate by Inman News in 2016. Award winning Realtor with ReMax Hallmark and team leader at The Connexus Group.