If you’ve bought or sold a house recently, or if you pay any attention to the news, you have probably had some experience with ‘multiple offers’ in real estate.
The market right now feels a lot like lining up for a Boxing Day sale only to find that instead of saving money, you have to pay more for those Lululemon’s you’ve been eyeing–and you don’t even get to try them on first.
Multiple offers have been in the news a lot lately thanks to the uber-competitive Seller’s Market we have seen. The number of buyers vying for properties greatly outpaces the number of homes available for sale.
So what’s the deal with multiple offers? Can you be successful in a multiple offer situation? Let’s take a closer look at this sometimes risky pricing strategy.
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Let’s Clear Things Up: What’s a Multiple Offer?
In real estate, a ‘multiple offer’ is a pricing and marketing strategy. It’s when a seller and their agent decide to price the home lower than market value in order to entice as many buyers as possible to make–wait for it–multiple offers.
So when you see homes for sale in Toronto selling for $300,000 over the asking price, chances are these homes are not selling for a price that’s overinflated past the market value. The home was likely underpriced to generate a larger number of buyers through the door.
However, what started as a unique and effective pricing strategy to help more buyers get access to a property and make sure sellers don’t leave any money on the table has now turned into a super competitive frenzy that is leaving a lot of people–okay, mostly buyers–disappointed.
In fact, multiple offers can quickly get out of hand and turn into a bidding war, often resulting in homes selling for astronomically more than they are actually worth. Not cool.
Multiple Offers in the Real World
It’s so easy to talk about real estate concepts from behind the safety of our keyboards, but what does a multiple offer listing look like IRL? Well first, you start by pricing the home low. The home is priced at least 10-20% lower than market value.
This initial low listing price will generate a lot of buzz and immediately get the attention of buyers and buyer’s agents. As a result, you can have at least 5-10 showings for a home booked within a day or so of the listing going live.
Over the course of a week, your home will generate so much attention, think something like 20-40 showings. And from those showings, you can probably expect between 3-10 offers.
For sellers, another benefit of this marketing strategy is that they have all the power. In a multiple offer situation, sellers can choose the closing date and specify the conditions (usually there are no conditions).
Who Should List For Multiple Offers?
Pretend you are at an auction. And the first item on the docket is The Heart of the Ocean, you know the one I mean. The one the old lady dropped in the ocean in the end. Next on the docket is a simple gold chain. Beautiful, yes, but not uncommon.
Which do you think will create more frenzy with more bids? Probably the unique, one-of-a-kind rarity right?
The same applies to housing and listing for multiple offers. Although most properties can go to multiple offers in a strong Seller’s Market, it is possible to get multiple offers in a balanced or Buyer’s Market too.
Some of the things I look for when determining whether or not to use a multiple offer listing strategy include:
- Is the home unique? A one-of-a-kind property?
- Is the home located in a sought-after neighbourhood that hasn’t had a sale for a while?
- Will the home generate a lot of demand due to its features? (For example, is it a Toronto loft when we’re currently in a loft drought?)
If any of these apply to your home, chances are pretty good that you can list low and end up generating multiple bids and selling within a week or less.
Speaking of Toronto lofts, check out our blog right here where I spill the tea on all the loft lingo you need to know!
When Does a Multiple Offer Turn into a Bidding War?
If you’ve ever reached across the counter at Starbucks and accidentally grabbed someone else’s oat milk latte, you probably won’t be surprised to find out that having more than one person show interest in buying the same property is really not uncommon.
Multiple offers are a fairly common situation in most types of markets, and in most cases, buyers go into it with the expectation that they will need to craft a compelling offer to get the seller’s attention.
However, things can get out of control pretty quickly when a multiple offer situation turns into a bidding war.
Basically, if the seller’s agent is in communication with the buyer’s agents, telling them about the offers they are receiving and giving the buyers a chance to up their offers, that’s when it becomes a bidding war.
What’s the Deal with Blind Bidding?
Technically, all offers are blind since agents are not legally allowed to disclose the terms of an offer (price, conditions, deposit, etc.) When the bidding becomes uber-competitive, that’s when things can start to get out of hand, and buyers can outbid each other by tens or even hundreds of thousands.
The Canadian Real Estate Association (CREA) is rolling out a pilot project this summer to try and cool down some of the issues caused by blind bidding. Sellers can opt into an open selling program that will allow their agents to disclose what’s in the offers they are receiving.
This is great for buyers, but would sellers actually want this? Blind bidding absolutely works to the seller’s advantage. If there’s $40k between the second-highest and the highest bid, why would a seller want to short themselves and disclose that the higher bidder could come down that much?
As agents, we’re always looking out for our clients, and if our client is a seller, we want to make sure they get the most for their homes. However, we also always follow our seller’s direction, so in truth, our sellers could give us written direction to disclose the terms of offers now, even before the CREA pilot project rolls out.
Will this initiative make a huge difference in the market? Only time will tell.
Whether you’re buying or selling real estate in Toronto, I have all the resources to make sure you nail it! Check out some of my other top blogs right here:
- Should You Buy First or Sell First: THAT is the Question
- Buying a Home in Toronto in 2022: Mission Impossible?
- Should You Hire Your BFF to Sell Your Home?
Multiple Offers Sound Like a Dream! Is there a Downside?
As a seller, is there anything better than selling your home for a high price with no conditions in a week or less? Probably not. But there are a few things you should know about before using this strategy on your listing.
Mainly, what if you don’t get any offers?
There’s always a possibility that this strategy won’t work. Perhaps the market shifted, maybe some comparable homes hit the market at the same time as yours. Maybe a similar unit came up for sale in your building. Anything that can dilute the appeal of your home can impact its ability to sell in multiple offers.
If you drastically underprice your home and then get no offers. There are only a few things you can do:
- Move up the date and list your home sooner.
- If it’s already listed, you can take the home off the market and re-list it closer to market value.
- Take the home off the market with the intention of listing it again at a later date.
The biggest downside of this is that you are losing time. You may have expected your home to sell, but now it will take longer. Maybe the market shifted, so not only do you lose out on time, but money too if your home value decreases. Either way, when a multiple offer listing strategy fails, it’s a disappointment for everyone.
The main TL:DR you need to take away from this post is that a multiple offer listing is not for everyone, and it’s not for every property.
How Do I Determine a Multiple Offer Listing?
First things first, you need to watch the market. You need to know what’s coming up, what has recently sold, and where the trends are going.
For me, I always keep track of properties that are being listed for multiple offers. I also keep track of how many offers a property gets. For example, if my last multiple offer listing only had 5-10 showings, I know right away that it won’t result in enough offers coming through.
It’s important to track market inventory and sales stats, but remember that multiple offer listings should be considered on a case-by-case basis. You need an agent who is active in the market to be able to truly understand if this semi-risky strategy will work in your favour.
Want to learn my number one tip for a successful multiple offer? You’ll have to watch my video on YouTube to find out! Check it out here.
Are you getting ready to buy or sell real estate in Toronto? Give me a call or text at 647-973-8392 today. I’m always happy to chat. You can also sign up for our monthly newsletter right here and get the latest Toronto real estate news delivered to your inbox!
