How to not get involved in a Toronto Real Estate bidding war
The stories are rampant, bidding wars are everywhere and it even scares you to think you’ll get into one if you are in the starting stages of your home search. So what is a bidding war and why would you want to get in one?
The Toronto Real Estate market is hot, inventory is low, which means there are more buyers looking for homes than the available homes for sale! It is inevitable more than one buyer or two or three…will be interested in the same home and submitting offers – Ta Da, we have a bidding war! Believe it or not, a bidding war can occur when there are as little as two interested buyers putting in offers on the same home. So, it’s easy to see how bidding wars can occur for many homes these days. It doesn’t necessarily mean there are 10+ buyers putting in offers on the same house (even though that is happening too). Thank you media!
How do they work? If you are putting in an offer on a house when there are other offers, you don’t get to know what the other offers are. I am always slightly amused when buyers ask me what the other offers are or do we get to find out. “That would be like showing me your poker hand”. No, unfortunately you go in blind with your one offer. You have to put your best foot forward, submit your best and hopefully highest priced offer with the most favorable terms for the sellers and hope you are the one the sellers ultimately choose.
So, why would you want to get involved in a bidding war? You probably don’t really want to, but you’ve found a great house that checks off all the boxes on your wish list, its in the right location and its listed at a great price. The problem is, it has the same appeal to other buyers as well. This is very common when the house price is attractive, it has great features and is in a great location. This does not go unnoticed to the many other buyers out there. Sometimes, it actually gives you more confidence moving forward with an offer to know others see the same things you do. BUT, as I tell my buyers who want to “try” an offer. The MOST important criteria to understand is the ultimate VALUE of the house.
When you find a house you like, the very first thing you need to know is, if it is priced at “Market Value”. “Market Value” is defined as “The highest price a willing buyer would pay and a willing seller would accept, both being fully informed, and the property being exposed for sale for a reasonable period of time.” Sounds reasonable enough doesn’t it?
So, all you need to do is find out if the house you like is priced at market value! How do you do that? By working with an EXPERIENCED real estate agent or broker who has specialized knowledge of real estate values in the neighbourhoods you are looking in. They will help you interpret recent sales data for houses that recently sold similar to the one you are looking at in the same location. Once you have this information you are in a better position to make an informed decision and put your best offer in on the property you like.
IF, you find out the house is grossly under listed which unfortunately happens all the time in this market, you will know that you are potentially competing with buyers who are in the wrong price range! This is unfortunate but is very common when a seller wants to open up the pool of buyers on their home and guarantee a sale of their house. They now have buyers who could never afford to buy their house because it is under listed, but these buyers get so excited by the list price they put in an offer! So, the only way to WIN a bidding war is obviously to be the highest price or to WALK AWAY and put in an offer on a house that is not grossly under priced but listed at market value or even higher. The chances are better that less buyers will be submitting offers on these houses as well.
This might seem controversial or counter-intuitive but it’s the only way to stay out of a bidding war and get a good price on a house that is priced at or slightly above market value. Yes there is less inventory on the market these days but you want to take a closer look at the houses that are STILL for sale, the ones that have been on the market 10, 20, 30 days or longer. Not every house sells in 7 days or less.
In my opinion, the houses that are on the market longer can often be hidden gems! You want to revisit what happened with them. Many times the sellers expectations were very high when they first came on the market but if they are still not sold, their expectations will become more reasonable as time goes on. You may be the only buyer putting in an offer on this property and the seller will take you very seriously if multiple buyers are not knocking down their door.
Interested in finding out which houses are still for sale that you might have a good chance at?
Send me a quick email at [email protected] with your search criteria, price range and preferred location and I’ll send you a list of the houses that are still on the market that may have been overlooked.
Together we can find you the perfect home at the perfect price just for you!