October 16, 2012 | bidding wars
Are bidding wars over?
The short answer: no. In fact, I’m sporting my helmet and sword, and I’m headed into a bidding war tonight to smite the competition! And it’s going to be tough fight since I am up against 6 other agents/buyers. Just goes to illustrate bidding wars are still here.
Though they are currently very much a part of the Toronto real estate market, bidding wars are simply less common than they used to be. Not too long ago, it seemed that almost every property was set up to end in a bidding war. All sellers had to do was put their house or condo on the market in Toronto and the buyers would come rushing in with their best offer. Times are different now, even though the bidding wars have far from disappeared.
Generally speaking, the market is inconsistent right now. Even in the next month or two, you will see fewer properties holding back offers a week in order to generate enough interest for a bidding war. But what makes some properties more successful at generating multiple bids? I’ve seen some great homes hold back offers and not receive one bid on offer day. For me, it has a lot to do with well-located neighbourhoods that are leafy and pretty, trendy or on the rise. And a little luck and timing doesn’t hurt either. But it’s not just about having a well-staged property with curb appeal.
Properties that attract bidding wars are often listed at a competitive price. To put it less mildly, less than market value to draw more bidders to the table. It’s risky, and at times frustrating for buyers and their agents, but it’s still a common practice with many to list below market value in order to get more offers. If the offers don’t come in after holding back offers for a week at a lower price, then the listing is often terminated, and then re-listed at a price that the sellers are actually willing to take. Not a practice I love, but one I have learned to accept as just part of the real estate business in this town.
So, in the months ahead, it may not be the best tactic to hold back offers and expect a rush of buyers, unless you have a real zinger of a place, and you are willing to list under market value. I think we will see more real estate salespersons listing properties close to the price their sellers would like without a holding back the offers a week. Already I have seen some properties listed above market value to leave a little room for negotiation. That means an offer any time, but a sales price that will likeley end up below the listing price. This is especially true in the condo market where bidding wars are fewer than with houses. This, in turn, will lead to more negotiations on the price or the conditions of the sale or the chattels.
It’s a balanced market. And it’s not such a bad thing. Prices, at this point, are not down, but they are not continuing to rise faster than the rate of inflation like it has been for years.
The banks and the goverment are making it tougher to qualify for a mortgage. So fewer people are being given mortgages. Strangely, from a Toronto perspective, this is putting a lot of pressure on the rental market, causing rents to increase substantially while first-time buyers are sidelined from buying and during a time of tight vacancy in this city.
The good news for buyers is that there is less competition in an environment where rates are still very good. For sellers, there’s no need to panic. Some may say there are warning bells for a busting bubble, but when I’m going up against 6 other buyers and their agents for a property, I’m not really feeling the bubble vibe. Prices are still holding up for now, even though bidding wars are not the only way to buy a house these days.