Multiple offers are a seller’s dream. They provide the opportunity to get top dollar for your home but can come with hidden caveats that impact your transaction unexpectedly. Also known as a bidding war, here we look at what every seller needs to know about the multiple-offer scenario to help you sell your home sans regrets.
Why Do Sellers Get Multiple Offers?
Let’s look at why you might get multiple offers. There are usually four reasons:
- Your agent recommends pricing above fair market value, so the buyer has “wiggle room” to negotiate. In this scenario, you kind of mislead the buyer into thinking they’re getting a deal. It doesn’t feel so good once all is said because it’s a little underhanded. However, there’s also a risk that your home doesn’t get offers when using this tactic, as buyers find the price too high and pass on viewing it.
- Your agent recommends pricing below the market to purposefully attract multiple offers. This is a widespread tactic, but it can backfire if the market is not primed for buyers to fight for your home when inventory is higher. You might also find buyers decide to come in below asking, so you end up selling below your home’s value. In the worst case, you have to take your home off the market because you can’t get the price you deserve.
- Your agent sets a hold-back date for offers. Your real estate agent might decide to hold back on offers until a specific date to force multiple offers OR to help you streamline the offer process. When done strategically, the hold-back date encourages competition and drives the price up. All bids must be submitted on the same date, which can make buyers antsy they might lose out without the option to put in their offer first. However, in some cases, you might have buyers avoiding your home, especially in balanced markets.
- You hit the jackpot, and everyone wants to buy your home! This scenario is the most desirable because there are lots of buyers anxious to own a home in your area. It is also more likely to occur when inventory is low and it’s a sellers’ market.
The moral of the story is you want to ensure your home is priced reasonably. You’ll attract more buyers, avoid missed opportunities, and see an open bidding process where you are most likely to come out with everything you want.
The Seller’s Unfair Advantage
In Ontario, bidding wars are blind. As a result, potential buyers have no idea how much other buyers bid. This gives you an unfair advantage and can really press those prices up when inventory is low. When a buyer wants to buy your home, their agent will register an offer, calling your broker and letting them know you have received a signed offer. However, what you might not know, is that registration is not required. Because of this, buyers are at a further disadvantage as their agents can’t even confirm that other offers exist.
It can also lead to some less-than-honest agents saying you have other offers in the hopes of increasing bids. Known as “phantom offers,” if your agent even hints at this tactic, you might want to reconsider them representing you as this is out-and-out dirty pool, meaning your agent can’t be trusted. In an honest bidding war, your real estate agent uses an honest, fair pricing strategy, and shares offer information with buyers’ agents to help improve your negotiating position. We think of this as your fair advantage.
With the market in your favour, you can be reasonably sure your house will sell. However, the following posts will help you maximize your results:
- Why You Don’t Have To Settle For Low Ball “We Buy Houses” Offers — No Matter How Bad Your Home Looks
- Top Seller Mistakes From An Agent’s Perspective
- How To Sell My Tenanted Property
Sorting Out the Best Offers
That brings us to the offers. In a highly competitive market, you can literally see over 50 offers on your home. Although not the norm, back in September 2022, one house in Scarborough’s Wexford-Maryvale area received 57 bids. This is obviously rare, but it just goes to show you what can happen. Regardless of the number of offers received, your agent sorts through the offer, reviews the terms and price, and narrows down the top picks. If you have upwards of 10 offers, you might look at four or five best offers, whereas under five offers are usually between the top two or three. We find it works best to keep all offers in our back pockets in case things don’t go as planned.
Negotiation is Your Friend
Your agent can play bad offers against good to test the waters to see how badly each buyer wants your home. While we like to deal with the top offers with the best price and terms, we can still use aspects of each offer to help you find the best terms and prices. Even though your agent doesn’t have to share information about other offers, it usually works in their favour to pull from the better offers to entice the less-than-impressive offers to improve their terms and price.
Reason Over Greed
While negotiations tend to work in your favour, you have to be careful not to get too greedy. Although buyers might feel desperate, remember that their agents are there to protect their best interests. As a result, you need to be prepared for buyers to walk if you let greed guide your decisions. Also, being too aggressive in the hopes of pressuring buyers into making unwise offers will usually backfire, as buyer’s agents will advise them to refuse.
Holding Back vs. Bully Offers
If your agent does recommend holding back offers in a highly competitive seller’s market, you can expect to receive what is known as “Bully Offers.” These offers come in despite your agent setting a holding-back date. Buyers with big budgets often like to throw their money around by surprising you with what might feel like a very generous offer. However, because you don’t know how generous other buyers might be, it usually makes sense to wait. Unless you are in a rush to sell, and everything seems completely hunky dory with the offer, waiting to see all offers is the best strategy.
Don’t Get Caught Up On Price
Obviously, you want top dollar for your home. But in multiple offer scenarios, price is not always the be-all and end-all. Although Ontario doesn’t have a formal cooling-off period, don’t let that create a false sense of security. Also, Ontario applies a .025% recission fee when a buyer backs out of an offer, but that is still no guarantee they won’t back out. The trick is to spot the buyer most likely to follow through on their offer. Here are a few examples:
Example #1: Financing
If someone’s offer is $50,000 more than other buyers but is also contingent on financing, you have no guarantee that this buyer will be approved for a mortgage. Therefore, in this case, buyers with pre-approval are safer.
Example #2: Inspections
If everyone wants an inspection, and you have an older home that might reveal some hidden issues, you might lean towards the buyer with a reasonable price willing to waive the inspection.
Tip: You can feel more confident accepting inspection contingencies by having your house inspected before listing. You can address changes that could be deal breakers and ensure you pass the inspection with flying colours. The other option is your agent can apply price adjustments up front and mention the issues to ensure everything is on the up and up. This takes waiving inspections off the table during negotiations.
Example #3: Selling Existing Home
Accepting the highest bid from someone whose offer is contingent on selling their existing home is another bad situation. If they don’t sell, you’re left without a buyer and back to square one.
Knowing When to State It’s Your “Best and Final Offer”
Even when things seem to be taking forever, be very careful with timing for your “best and final offer.” It can work in a heated situation with multiple bidders hanging in there until the bitter end or when your property is considered scorching hot and is unlikely to see bidders baling on you. But, in the wrong circumstances coming across as completely unmoving at the wrong time in the game can send top bidders packing. That means you’re left with lower bids and less favourable terms. Stay the course and listen to your agent to avoid becoming too emotional.
You probably already know that strategic updates can help you sell your house. But what updates? The posts below will give you some ideas:
- Trendy Vs. Classic: Renovation Tips For 2023
- Top 4 Foolproof Neighbourhoods For Toronto Investors
- The Not-So-Handy Person’s Guide To Diy And Leave-It-To-The-Pros Projects
The Bottom Line: Trust Your Agent’s Gut
An experienced agent is your best advantage in a bidding war. You can trust them to make the right decision. They also have built-in “gut instinct” telling them when the offer is right or when they might smell a rat. Also, they know Toronto buyers’ agents and build mutually respectful relationships that ensure everyone is dealing on the up and up. Their job is to ensure you get the best deal possible and will point you in the right direction toward the most desirable agreement.
If you’re looking for the best Toronto real estate team to guide you on making wise selling decisions, call The Christine Cowern Team at 416.291.7372 or email us at firstname.lastname@example.org. We’d love to work with you!