Multiple Offers and Bidding Wars
In Toronto’s competitive marketplace, buyers have to expect that they may be in a multiple offer environment. This is largely due to the shortage of listings. That’s just “supply and demand” from economics 101.
Basically, this means that their first offer should either be their best offer, or very close to it.
In order to elicit multiple offers listing agents will:
1) delay the presentation of offers for one week to allow everyone to view the property,
2) underlist the property (that is set a very low asking price), so that enthusiasm is created among purchasers,
3) obtain a home inspection report and make it available for review.
A buyer should have a pre-approved mortgage. There’s no point putting in a condition such as financing, when there are five or six other bids. And, if you are not prepared to offer a high price, unconditionally and a short closing, then you will simply be sitting on the sidelines, waiting for the next property to come along.
The only real way to avoid this is to either obtain a pre-approval from the bank, secure some interim financing so that you will be covered if you have to carry two properties for a short period of time, or simply focus on an area where there are relatively few multiple offers.
The rules of engagement for “bidding wars” and “playing fair” are not regulated or legislated, which means, of course, that they could be rather unfair an provide an advantage to a particular buyer. Best to know the particular rules ahead of time.
As we proceed towards the summer, we should have an increased number of listings. This might minimize the number of multiple offers situations and normalize the market.
Brian Madigan LL.B., Broker