What others say about bidding wars
My first post of this topic drew more than 5,000 regular readers of Globe and Mail. Some were critical, others supportive. It is a topic worth revisiting from time to time.
Like it or not, bidding wars are part of our life. Depending on the market conditions there may be quick and furious bidding, while sometimes sellers feel lucky when they get a single offer way below the asking price. If you want that home badly, be prepared to pay up more in case other buyers have similar taste and have laid an eye on the same property.
Scarcity justifies bidding wars for those, who are willing to and able to pay more for a coveted piece of real estate. The average home buyer, however, should try to avoid being involved in bidding.
Bank of Montreal did a survey to test how Canadians feel about participating in the multiple offers game. According to the results
Even among the 25% willing to lock horns with other buyers, most would prefer to keep the grappling to a minimum. Half of respondents willing to engage in a bidding war said they’d draw the line at paying more than 10% above the asking price. A further 25% set their upper limit at 20% over asking.
And such approach is quite sensible. After all, often buyers make their offer at 10% below asking price… Locations like downtown Toronto and Vancouver, however, usually attract the attention of many buyers. Some of these buyers have deep pockets. Fighting them is a losing game.
Here is what other people think about bidding wars:
Citygal29 writes in a comment here
As a real estate agent, I wish more buyers were open to renovating property. Pick the neighbourhood(s) you want to live in and look for the absolute WORST property you can find – the one no one wants. Consult the appropriate professionals to find out how much it would actually cost to fix ‘er up. Your agent can help, home inspectors too. You wont be getting caught up in any bidding wars – that’s for sure. You can take your time without any pressure to buy. You’re likely to save tens of thousands of dollars. And you’ll make money when you sell.
I know renovating is not for everyone, but it’s an excellent option if you want to avoid overpaying for real estate.
anonymous_711 shares here his own experience being dragged in a bidding war
Over-priced markets are driven by greedy realtors. We’ve gone through this process with one not too long ago. We wanted to put down an offer slightly above the asking price and our realtor highly suggested we put another 20k because there were other interested parties. We decided to pull out at his dismay. Later we found out that the home actually sold slightly below our original asking price! Basically we lost out due to our now former realtor’s greed. On a positive note we found a fantastic realtor who worked within our means.
Frank Seldin is an American and he comments to this article on bidding wars, run by the Wall Street Journal. I find his approach to avoid bidding wars and still finding the house you love to live in quite interesting.
If you go into a neighborhood and find bidding wars because there are few properties listed, just start knocking on doors. Pick the houses you most want to live in, and knock on the door and ask. If you tell people you are interested in making an offer at a good price, you’ll get a lot of bites. And a lot of referrals.
Of course the realtor will tell you “we don’t do that in our town”, but they are lying to protect their commission. And by the way, that reduced commission is money you and the seller can share. If you do your homework, you don’t need a realtor to do a real estate deal (spend about 20-30% of the realtor fee on a good lawyer instead).
Yes, it is hard work, but you are about to spend 3x your annual income and make a huge purchase. Put the time and effort in to get exactly what you want.
Paul Hecht, a Canadian realtor, gives here his explanation how bidding war are created:
For those who are not clear on the process, a realtor’s duty is to their client. They must give their seller all the information and then let the seller decide what they want to do with the information.
In hot markets, the listing agent will ask the seller if they would like to list the property low and then hold off accepting offers, typically for a week to try to generate multiple offers, OR the seller can list it at market value and accept offers immediately.
The seller is the one who picks whether they want to try and create a multiple offer (bidding war) scenario, not the realtor.
Here you have it – a few random opinions on bidding wars. What about you?Are you willing to bid the price up if there is a chance to lose a house you like a lot? Do you have a story to tell?