Bidding wars have been a part of GTA’s Real Estate Industry for at least a decade. We saw bidding wars happen while interest rates were double than what they are today i.e. before 2005, during the 2008 recession and first quarter of 2017. Globe and Mail (2017) published an article showing multiple properties that sold $200,000 (56%) over asking. Naturally, this led to an unsustainable market, where prices began to dip after the implementation of new rules, leaving our market in 2018 to be more stable and reasonable for buyers and sellers.
If you are the buyer whom likes purchasing houses ready-to-move-in condition, situated in high demand neighbourhoods of Greater Toronto area, these bidding wars will be something you need face very often especially if you’re trying to acquire a freehold property, which is expected to become a luxury over next decade.
The Five Most Common Reasons for Bidding Wars are Stated Below:
1. Subject house for sale or condo for sale is priced & presented well.
2. Demand for real estate is more than the available supply.
3. Consumer confidence is high due to continuous appreciation and momentum.
4. Seller decides to hold back on accepting offers until a certain day to generate maximum interest.
5. Lending criteria’s are about to change and do not favour buyers.
In bidding wars, the listing agent must tell buyer agents, how many offers have been registered for the subject house/condo for sale. The listing agent however, is not allowed to mention any buyer names and bidding prices. Most times, a buyer real estate agent calls the seller agent and tells him/her that they plan to make a formal offer registration. But that does not guarantee anything, as prospective buyers may change their minds last minute. What this means is that the seller may get a handful of these “registered offers” during the day with no guarantee of how many sales will actually be presented to them during a scheduled offer presentation.
There may come a time where there is not a single offer on the table or there may simply be one from a buyer who understands the dynamics of a bidding war. Now, what if a buyer loved the subject property and decided not to bid for it because they thought “Bidding wars often mean…..out of control negotiations.” On a few occasions, I have been able to negotiate lower than asking in bidding war situations with two or more offers at stake and thankfully, was able to win the deal for my client. Having said that, the results to a bidding war could be endless. It is all dependent on the motivation of both negotiating parties. No one involved will know of the offer price these motivations result in, until the end of this process. So do not be afraid to participate. If you have hired an experienced and qualified real estate agent, his/her experience can help you take a more informed decision through the bidding process. Always keep in mind, end decision is always YOURS, that how much you’re willing to pay for any house or condo on sale.
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