NO
We are getting into that time of the year when activity in the real estate market can get a bit feverish. Some people would offer $10,000 more to the same home they saw in January if they see it again in the spring. What a few tulips and neat front yard can do to our perception! It becomes even more interesting when the real estate agent says: ”The other agent just told me that he has received three other offers”… That only is enough to trigger a whole new set of emotions. The main one is – “I love that home, I hate to lose it over a few thousand dollars”. And that is how things start to roll into one direction only – overpaying.
Bidding wars come and go (depending on the health of the market). They resemble the go-go era of the late 90s when dot.com companies were all the rage in the stock market. It was normal to see their stock value going up and down by 20% within a day or even hours. Nobody had an explanation, but everyone participated in the game. You know the final result.
When you think about it, paying more than what the seller asks means:
- The seller does not know the real value of his home
- The representing real estate agent did a sloppy job when establishing the asking price
- The bidding buyers know something that makes the home more valuable and willing to pay more.
What is it? A hidden treasure box in the attic?
How a bidder would justify his action? Just because the other guy is prepared to pay $10,000 more, do you have to follow? The idea that neither the owner nor the agents now the market as well as the buyers is rather thin. Bidding wars make little sense to a well reasoning mind.
Yes, sometimes bidding wars are orchestrated by the seller, the agent and other interested parties to inflate the purchase price and profit. Needless to say, such a practice is illegal. But if you find yourself in the midst of a bidding war over a real estate property, at least know what can help you become the winner. Mark Weisleder has written some tips for The Star. While all of them are good and represent common sense, I like the most the last advice:
If you are suspicious about whether there is a competing offer, consider inserting a clause that states that if the seller does not receive another offer, you will have the option to either cancel or revise yours. You can also include a requirement that if the seller accepts your offer, they will provide the name of the competing real estate brokerage that submitted the other offer.
I always try to discourage my clients from falling into the trap of a bidding war. By just saying “no” to bidding wars makes you already a winner.
Infantile: now that is a good discription of this “arcticle”.
For one, market demand will do what market demand wants.
Two: REALTORS are bound by many regulations and rules both in CREA, local boards, and the provincial acts that make false representation illegal. So we cannot say there are multiple offers if there are nbot without encurring the wrath of one or all those rules and regulations. Or do your REALTORS lie in your office?
Third: creating an offer with clauses that suggest an act that is either outside the purpose of the contract or calls upon an act by a third party not in the contract (the real estate company is not a party to the contract) dilutes the contract to the point of possibly making it an unenforceble contract – on either buyer or seller. That is an infantile clause at best – rediculous.
Statistics asside – how does that help the public?
As a real estate professional in the US who has advocated for transparency and consumer rights over the past two decades (see http://bit.ly/RECafeTimeline), IMHO it’s essential to use data to reality check perceptions of bidding wars in different housing markets. I can’t comment on the underlying supply / demand imbalance that Lloyd Gray says is legitimately driving prices over asking price in Toronto, but I can say that the preliminary analysis of MLS data in Massachusetts seems to answer the question bloggers and prudent home buyers are asking here:
Bidding Wars: Reality or hype?
http://bit.ly/DisarmRE
Has anyone done a similar analysis in Toronto or other housing markets in North America or beyond? If so, have you examined and exposed the role of in-house sales, conflicts of interest, and other questionable practices listing agents used to “orchestrate” bidding wars, as this blogger writes? We’ve got some revealing data and are looking for more patterns.
Thankfully, from the home buyers’ perspective, new tools and business models — inside and outside the real estate industry — make it possible to validate buyers and bids. Rather than waiting for taxpayers to pick up the cost of another real estate boom / bust cycle, doesn’t make sense for industry regulators to beginning implementing policies that require transparency and verification now?
http://bit.ly/NoFooling
I’m in agreement with the author of the article. The setup of a bidding war is to encourage buyers to over pay. The only winning response is to run away. I’m in downtown Toronto and I walked away from any bidding wars until I found what I wanted. If all the houses for sale are selling through bidding wars, guess what, that’s a bubble. Let the greater fools enter the bidding wars; don’t be the one to over pay. They will be the ones selling at a loss in a few years; what goes up must come down
The premise of this article is infantile. Keep in mind that relatively few houses come up for sale each year; many people who live downtown (my view is Toronto-centric) could not afford to purchase their homes at their current valuations, and may have purchased their homes for 20 or 30% of the current value.There are bidding wars because there are no new detached freehold properties to be had at a reasonable distance from downtown (my metric is a half-hour bike ride.) Hence, the value of the existing stock rises, and will continue to rise until the number of people who want to move downtown and can afford bidding war prices equals those who want to leave. Compared to New York, London, or Hong Kong, Toronto’s downtown houses are a bargain. Until the jobs that provide the incomes that allow people to pay this much for a house disappear, we’ll have rising prices, and bidding wars.
Bidding up a house purchase is pure capitalism. The market decides what a home will sell for, not a land parasite, AKA Real estate agent.
As in all things, it’s buyer beware, not agent beware.
Besides Canadians ‘over-pay’ for everything else in this over regulated society, why not a house?
‘land parasite’
A great definition for a real estate agent.
As for Canada being over-regulated, how ignorant. Though capitalism is our game, it’s our willingness to not let it run and ruin our lives that has made us a great nation. Humanity before money.
If you want unfettered capitalism and the social ills that come with it then move to the States!