October 30, 2014 | bidding wars, bully offers, buyers, houses, last minute offers, multiple offers, sellers, Toronto real estate
Participating in a bidding war is a strange practice. If you’re working for the seller, it can make your life a whole lot easier. Sellers sit back and have buyers and their agents present offers and gush all over them. They simply have to pick their favourite one, which is usually the one with the best price. Buyers and their agents wait in cars parked outside the seller’s house or the listing brokerage hoping they are the one. It sometimes feels like a sad version of The Bachelor.
From the buyers’ side, it’s tough. You can spend a lot of time preparing for a bidding war and then get your ass kicked. Not a good feeling. It takes time to line up your financing and possibly conduct a home inspection. You may be emotionally invested. It may be the house you have been dreaming of since you were seven years old. And sadly this may be the case for several other buyers too.
I think it is quite human to have an aversion to bidding wars. A lot of people feel uncomfortable being a part of something so mysterious. Even if you are the one whose offer is accepted, you may wonder if you’ve gone too high on price since the selling agent cannot divulge the contents of the other offers. They are, however, a fact of life in many parts of Toronto with many kinds of properties. Just last month alone 62.3% of all transactions on houses at Bosley Real Estate received multiple offers. So, if you must go into battle, it’s best to be prepared.
There are no guarantees with bidding wars, but from a buyer’s perspective I think it is a good idea to have a plan. Usually, it is wise to do your due diligence in advance of offer night – line up your financing and do your own home and termite inspection. But that’s not the plan I’m taking about. I think you have to be prepared for any surprises that may come along.
So, with most sale representatives who are holding back offers, they will ask buyers and their representative to register any offers by a certain time, like 5pm and they will start reviewing offers by 7pm. Now, if most buyers are told this, they believe that they must register an offer by 5pm and be ready to present their offer to the sellers by 7pm. And that would be understandable.
Of course, life does not always happen on schedule. So, if an offer comes in at 6pm or even 7pm, will a seller say “No, I will not see it!”? Of course not. They will want to see it. Now, according to the rules of real estate in this province, the selling agent needs to inform all interested parties who have registered an offer with an update of how many offers are on the table. Some times, this does not always happen, and sometimes offers come in at the last minute.
There are some real estate representatives on the buyer side who use this last minute surprise offer as a kind of tactic. They will call at the very last minute to register an offer. Many feel this will throw off their competition this way. Sometimes this tactic works, but I always tell my buyers that an offer can come in at any time up until you have a signed contract. Be prepared!
Let me illustrate this by an experience I had this year. I was representing a very nice couple who had found a home that they loved. Offers were to be presented at the owners house. Buyers and their agents walked up to the door, one by one, to present their offers. I was the third person to offer on what I thought was the last offer presentation of the night. When it was my turn, as soon as I walked in, I greeted the listing agent and the seller, and asked: “How many offers are you reviewing tonight?” Now let me remind you that my clients and I were told three offers, but when I asked this question again, I was told five. So, I excused myself and told the sellers and their agent that I needed to review this information with my clients before I could present my offer. I walked back to my car, spoke to my clients who felt they would like to raise the offer a certain amount now that we had five purchasers in the running to buy this house instead of three. Then I walked back into the house and presented my offer fully aware of ALL the offers that had come in.
What is the point to all of this? Well, I think buyers should be prepared for several scenarios. I always suggest to my buyers that they have a price they are willing to pay, within a reasonable range of market value, when there are no other offers on the property, one or two other buyers, or five or more offers on the property. That way, no one is caught off guard if the last minute offer tactic is pulled out and buyers feel unprepared.
Luckily, two last minute surprise attack offers did not prevent our offer from being the chosen one! And on behalf of my clients, I can safely say that it was even better than landing the Bachelor!