May 25, 2021 | Competing for a property
For the seller, this is how offer night in Toronto is suppose to happen: A day is chosen by the seller and the selling agent to review offers on a given property, usually a week after the property has been listed. They often list the property slightly below market price, though this strategy may vary depending on the agent and the neighbourhood. Over the week, buyers go through the property. Come offer day, the seller hopes to have a number of offers available to them where buyers and buyer agents compete to obtain the property. So, if the seller has five offers, as an example, they will choose the one that suits them best, usually based on price, but also closing date and any conditions that may be in the offer. Ideally, they will want a firm sale. In other words, no condition.
Sometimes, even in a hot market, a property does not receive any offers on offer night, even if it’s below market value. Why would this be? If the sellers and their representative have listed the property below market value, why did no one step up and buy it?
Here are some of the main reasons I have seen:
THE SELLERS WERE UNLUCKY
This is oddly common. The sellers and the selling agent may have done everything right on a great property, but still no offers at the table. Maybe there was another property nearby that was just a little bit more appealing that attracted all of the buyers. Maybe it was just an unlucky week.
In this case, the house is not actually listed below market value, or even at market value. Some sellers (and selling agents) do have an inflated idea of what their homes are worth. So, it is a possibility that no one bought it because the price was too high. I would say this is rare for most Toronto properties, but there are sellers out there who go for the agent who tells them the highest price their home will sell. Don’t expect that realization to hit the sellers right away on offer night. It may take a much longer time for them to understand their pricing mistake.
THERE’S SOMETHING WEIRD ABOUT THE PROPERTY
I find when buyers go to see properties, most have an oddness threshold. They can handle some things that are not perfect. Maybe the kitchen needs updating. Maybe the basement has low ceilings. Maybe the property needs a new furnace. Most buyers know that older condos and houses come with imperfections. But then there is just weird. In my first house, you had to go through the washroom to get to the backyard. Very weird. I fixed that right away. Maybe you have neighbours who have a tire collection in the backyard. Maybe there are 30 cats living inside. Maybe it’s just a really ugly renovation. You get the idea. Most buyers can handle fixes and easy-to-imagine renovations, but weird gives them a funny feeling, and does not lead to a buy.
This happens from time to time. Buyers become exhausted from competing for properties and losing. So, they stop targeting properties they feel will have too many offers. This really does happen. Sometimes when a good property doesn’t receive any offers, buyers are shocked. They decide to place an offer after offer day because now the buyers feel there won’t be 30 offers on the property. They feel they may actually have a chance. If they are not the only buyer that feels this way, they still may find themselves in competition the day after offer day.
THE MARKET IS CHANGING
If the market is losing buyers, then the strategy of holding back offers for a week may not be working in a changing market. If other properties in the area or in the same condo are having the same fate, then likely this may be the case. If it’s not happening to other properties, see the four options above.
So, what if you do if you’re one of those buyers who wants to put an offer in on a property that received no offers. What should you do? Well, consider the following:
The first thing I like to do: Have a discussion with the selling agent to see how the sellers are responding to no offers. If they listed below market value, they are likely going to re-list at a higher price. In other word, if they listed at $999,000 in anticipation of competition driving the price up to where they were expecting, say $1,100,000, then they may re-list at $1,129,000 and take offers any time. When people take offers any time, they are often (but not always) slightly above or near what the sellers want. Once you have a sense of where the sellers want to land, you can start negotiation.
Using the above example, buyers often ask: If they listed at $999,000 and no one offered on it, then why don’t we just offer the list price?
It’s not a terrible idea, but it likely won’t work. You could offer at $999,000 to get the ball rolling with the seller. After all, they have listed at a certain price, and you are the only offer. Shouldn’t they take it? No one else is at the table.
This will all depend on how the sellers are responding to no offers. If you have an indication they need to sell or if you don’t have any clear response from the sellers, then I say, make an offer! If, however, the list price was listed below market for the anticipation of driving up the sold price, then the seller never had any intention of accepting something at list price.
If you’ve had a conversation with the selling agent and they’ve indicated the seller’s expectations are higher than list price, then the seller won’t be interested in your offer, if your offer is nowhere near what they were expecting. They would not give up on price that easily.
Can you still land a deal? Maybe. The seller would likely re-list, and as time marches on and the property has been on the market for awhile, a lower offer price may be more likely to be considered. If you lowball too early, you run the risk of turning off the seller on you, who will think very little of you if you pop up again to offer. If they do re-list at higher price, and a number of weeks pass and there’s no sale, then you drop the lower offer. The longer sellers wait, the more the market tells them the price is too high or their house is not worth what they thought. Then you have some options to negotiate.