We have three seasons in Toronto; winter, construction, and multiple offers.
As new properties begin to pop up in your searches, so does the onslaught of the infamous bidding war.
Before we dive into some things you can do to increase your chances of “winning” the home of your dreams on offer night, let’s take a quick look at what all of this means in the first place.
What is “holding offers”?
In short, “holding offers” is one way of referring to the scenario where a home is listed and priced below market value and an offer presentation date is set. The strategy here is to generate multiple offers on the same night, this way everyone interested is in competition. The listing agent’s end goal is for the home to sell for way over the asking price.
In Toronto, just as much a certainty in life as “death and taxes”, so are multiple offers. No doubt you will find yourself battling it out in a bidding war if you’re searching for a home in today’s market, and so we’ve compiled a list of things you can do to increase your chances of success.
First things first: come to terms with the fact that the cleanest and highest priced offer usually wins
In the majority of cases, the cleanest and highest offer is the one that gets the knockout. “Cleanest” referring to the conditions in your offer, (or more appropriately; the lack thereof) and “highest” referring to the offer price.
You need to be able to rely on your agent’s advice and guidance in order to be competitive. They should be able to provide you with some insight into what it might take to win. There are many elements to consider, and your agent should also be highly communicative, both with you as well as the listing agent. The more info you have, the better your advantage. One thing remains true across the board: finding yourself in multiple offers is no time to try and get a deal.
Don’t lowball on offer night
Everybody wants to spend as little as possible. Every seller wants the max, and every buyer wants to pay the minimum. The harsh reality is that if there are multiple offers, your chances of getting a “deal” are virtually nonexistent. Only the most competitive offers will have a chance. That’s not to say you need to overpay, but depending on the number of competing offers on the table, your ideal max might just not be enough. Sometimes it really is best to take a pass and keep searching versus throwing a low offer in just to see what happens. Making a low offer may just work against you in your search moving forward.
Even low offers will contribute to inflating the final sale price
It sounds crazy, but it’s true. If there are 10 offers registered, chances are that half of them aren’t even going to be competitive, yet they still count toward the total number of offers on the table. It’s the total number of offers that affects how a potential buyer will approach the situation and since the current “bidding system” is not transparent, all offers are perceived as competition. Only the listing agent knows the prices of each offer and is not legally permitted to disclose that info to you or your agent.
This matters because when one home sells, it’s not uncommon for one or two more in the area to go up for sale soon after. If the first home on the street sells for an inflated sale price, it’s going to create an inflated expectation in the minds of the other sellers on the street. It also provides a comparable for other interested buyers, and they might just be comfortable paying more than they would’ve before.
Discuss your strategy with your agent, and listen to their advice
Every multiple offer scenario is a little different. The rules of the game are more or less the same across the board, but it’s imperative that your agent is experienced in negotiating and winning multiple offers for their buyer clients because your chances of success will depend largely on whether or not they know what they’re doing. For our blog “Do you even real estate, bro?” we discovered that 73% of registered Realtors® in 2019 closed no more than ONE sale. Do you think that 73% of Realtors® have the experience required to make your offer night a success? Who will you hire to get into the ring for you on fight night?
Ask your agent how they plan to approach the bidding war, ask them every question that comes to mind. You need to be on the same page with your agent in order to make this experience a successful one and communication is essential. Set yourself up for success right out of the gate.
Ding Ding!
That does it for “round 1” of this two part blog. The second half is coming next week, and we’ll provide even more insight into the structure of your offer, and some more pro tips to help make your first offer night experience your last.
This blog is intended for educational purposes only, and not to be construed as expert or legal advice and is not intended to solicit buyers or sellers currently under contract with their Realtor®.
