August 3, 2017 | bidding wars
Let me be clear. Bidding wars are not over. They still exist and and with the right strategy, could be very effective for a seller. When the market is tilted so much in the favour of the seller with runaway prices and anemic inventory, bidding wars, for a long time, almost felt expected in many parts of Toronto. If a seller has a property in an in-demand location, the seller can feel invincible. When the market has the right conditions for them, they would almost always gravitate toward this one strategy: Holding back offers for a week with plans to accept offers on a given day. With this strategy, the hope is to attain several offers on their home creating bidding war and selling at top price.
As we have learned in the first half of 2017, however, markets can shift, even if it is temporary. When the buyers are not buying as much and the sellers would like to sell, bidding wars don’t always proliferate. During May and June of 2017, we have seen many Toronto properties hold back offers only to receive zero offers on offer night, even in some desirable neighbourhoods. During these times, it may be wise for a seller to look at other strategies.
So, what should you do if you’re a seller selling in cooler times?
First up, know your neighbourhood.
Simply put, not all neighbourhoods will act the same. Some neighbourhoods will see more homes for sale with a longer time to sell than others.
Also, not all price points will act the same.
So, in May and June of 2017 if you were looking for a condo under $700,000, you would likely still have some luck holding back offers. In the Spring of 2017, I had a client looking for a tiny starter condo for himself under the $400,000 mark, and the competition is still fierce. Over two million, on the other hand, and there the competition is scarce. The Toronto luxury market was the sector of the Toronto housing that was most impacted by the Foreign Buyer Tax introduced in April. So, these homes had a much tougher time selling. Rarely did homes sell in a bidding war.
In Toronto, many of the sellers did not have to sell. So, when they did not get the price they wanted, they simply took their property off the market. For those who needed to sell in a specific time frame, the key is to know your competition well.
When prices are falling, many sellers are slow to adjust to the new prices. As a seller that needs to sell, you need to get under the market if it’s cooling. If you’re neighbour’s comparable house has been on the market for 3 months and not selling at a million, then pricing your house at a million is not going to work.
Another strategy that won’t work. Pricing your house at a price you want and leaving it on the market until someone offers you that price. If you are priced too high, your listing will only help to sell other properties near you.
When someone sees that your home has been on the market for 180 days, then they will either assume your property is overpriced, or there is something wrong with your home. When days on market tends to get too long, it becomes a stigma.
If you just must have your price, take it off the market, and re-list at a more suitable time or spend some extra money to make smart upgrades that will help sell your home.
Also, for sellers, you have to be able to negotiate. This is something that has been rare in many Toronto transactions for several years, but sellers and buyers may need to have these skills sharpened up again. Negotiation does not mean you cave in on every thing from price to closing date. But it does mean you compromise. Negotiations are not always going to be worked out in an evening. So, be prepared for this process to take some time.
When the Toronto real estate market tilts in the favour of the buyer, buyers may find themselves giddy with excitement after so many years of following a seller’s market.
It’s such a rare feeling to have. Buyers may be a little uncertain about what to do if they have been looking for a property in a seller’s market that suddenly tips to their advantage. They come to expect that properties must be competed over to be obtained.
Like the seller, buyers may find themselves having to negotiate on some properties. You may be able to obtain a property for under the asking price if the seller is not holding back offers on their property. Just don’t get too carried away and start thinking that this is the new reality or that sellers are going to suddenly starting selling their properties for a song. That kind of price cooling would take awhile, if it were to happen.
For buyers the key thing to understand is that the market can shift quickly. It’s a welcome relief when buyers can take their time, see properties and compare. They may be able to even land a property at a deal of a price if the sellers are under pressure to sell.
Buyers, however, can fall into the same trap as the sellers and try to time the market. The problem is you don’t really know where the top or bottom of the market will be until it has passed.
I think some people who have been following real estate for awhile have been conditioned to believe downturns last a long time since the Toronto real estate crash of 1989 took so long to recover, but that’s not always the case. I can look back at 2008 where prices dipped for less than a year before rebounding back up. If you are a buyer that becomes too obsesses with bargain hunting, you may be shocked when the market rebounds and heads back up. If you start to see more transactions taking place, it may be a sign that things are heating up again.
Whether you are a buyer or a seller, the key is to understand what is happening in a given market at the point of when you want to sell and when you want to buy. You cannot will the market.
Sellers, if there is a particular time where the Toronto market favoured you with impressive sold prices and quick sales, you will not always find yourself selling in this market. Buyers, if the market is slipping, don’t expect this to be a trend to last for years. It could be only lasting a few months. As always, think long term.
No matter what the market is doing, whether you are a buyer or a seller, the key is to understand your market. Seller’s know how to compete with similar houses on the market, no matter what the market is doing. Buyers, you need a strategy as well, to land a desired property whether its a red hot sellers market or not. Prices do go down, but they don’t stay down forever.