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BUYING STRATEGY

How to win a bidding war

SYDNIA YU

From Friday's Globe and Mail

Latest comment posted at 5:25 PM EDT 12/05/08

For every offer made on a property, add $10,000 to the list price, one agent suggests. ...Read the full article

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  1. Dave Kar from Vancouver, Canada writes: When this is how things are working out in the real estate market, we really need a recession!
  2. R M from Ottawa, Canada writes: Was this written by a real estate agent? Sounds like an article from about 5 years ago, perhaps, but not from today's market.
  3. J L from Toronto, Canada writes: "For every offer made on a property, add $10,000 to the list price" if you hear this from your agent - run away very fast!

    That is real estate 80s style and does not represent how most qualified realtor work today. There is a logical and succesful way to win bidding wars that doesn't involve ridiculous thinking like that.
  4. J L from Toronto, Canada writes: Furthermore RE: 10,000 for every offer

    If there is a row of townhomes (all identical) & 3 sold in the last month for $400,000 and then one comes up for sale for $339,000 and there are 13 offers on it would you bid $470,000 for it? That's not logical.
  5. Old blue from Canada writes: An amusing article and irrelevant article in today's world.
    Even my bird who perches himself above the article in his cage laughed himself silly.
  6. j m from Canada writes: Here in the Maritimes, offers are typically less than asking price, and a real negotiation takes place, arriving at a fair price.

    A bidding war is based on speculation; look south and see the results.
  7. True North from The Free West, Canada writes:
    The bottom line: Realtors are parasites.

    Don't EVER be fooled into thinking that they work for anyone but themselves.

    Look into: ComFree, WeList, FSBO etc.
  8. Edward graydon from hAMILTON, Canada writes: What a crazy thing to say as a head line. Every one is corect that as so far blogged . IT must be that Now there really are going to be much;much cheaper prices on there way in every neibour hood;but then so will yours. The person that holds no morgage will be o.k ; but if you are paying for a house that you just paid $500.000 for that is now worth 300.000. Ouch!; Dont borrow against your home and life is great

    Edward H.C Graydon
  9. Adil Burney from Canada writes: Yeah, you will "win" but now you've overpaid at the top of a housing bubble. Be careful what you wish for... This article is just another sign of how crazy things have become in all things housing in Canada. There may be times where it makes sense to pay up. This is not one of those times.

    http://canadahousingcrash.blogspot.com/2008/04/chain-of-events.html
  10. S N from Canada writes: I recently bought a house (for less than asking actually because it needed work and was tenanted at the time), but we bid on a couple houses before that where there were other parties in the fray. On one of them, the seller's agent called the top 3 bidders (we were one of them) and said that after round 1, three of us where "in the same ballpark", and that all 3 parties were invited to revise and re-submit their bids. I assumed that meant that we were all separated by a few thousand dollars (the house was listed at $349k), but my agent informed me that nothing could be further from the truth. In fact, she said for all we knew, we could be the high bid by $10,000, and the seller's agent is simply trying to milk everyone for more money. This whole strategy of undervaluing the list price and holding offers to induce bidding wars was contrived by agents in order to do one thing: Increase their take on the sale. They say they're acting in the best interests of their clients, but how seriously can you take that when their contracts allow them to act for a seller and a buyer of the same property, at the same time!? The best way to win in this market is to stay away from bidding wars. It's one thing if you're up against one other person and things stay reasonable, but if there's 7 other people - stay away! Unless you're willing to put down a big downpayment (so you start off with lots of equity), or you're not planning on reselling for 10-15 years - it's not worth overpaying.
  11. Byron Heppner from Winnipeg, Canada writes: Soooo... to sum up the advice---throw all the cash you have at your offer, or (like the couple in the article) $50,000 more than you wanted to spend. Sounds like a win-win situation (for the seller, and your real estate agent).

    $10,000 per offer???!?? LOL
  12. joren carlson from Canada writes: The $10,000 per offer thing is SO last year. The market is changing. I went into a competition situation recently and not only was I the only offer, I got the place for a substantial price UNDER list. Meanwhile, comparable homes just down the street are still sitting priced higher and unsold for well over a month. I know of another home (in one of the "desirable" areas the article mentioned) that is a beautiful home and a steal at the price it's listed at, and still has no offers on it. FWIW, its often the homeowners that are insisting that the bidding situation be created, against the advice of their Realtor. They (the owners) still think that the market is booming and high prices over list are the norm. Anyone that buys a home without benefit of seeing an inspection report, or having one done on their own needs to have their head examined.
  13. gao gao from Canada writes: Who is this agent representing at the moment? Come see my house, and start bidding.
  14. K L from Toronto, Canada writes: The last line that says the agent's motto is "if you outbid the other guy by $10,000 but it makes you happy, then it was worth it" is priceless!! My husband and I had a good laugh about that. Believe me, the agent is really, really happy on the commission they made on that extra $10,000. This whole article was good for a laugh about how crazy people have become in this market. I once read an article talking about a couple with an original budget of $400K who bought for $750K...are they insane????
  15. J L from Toronto, Canada writes: joren carlson writes "The $10,000 per offer thing is SO last year. The market is changing. "

    The $10,000 thing is, unfortunately, still around BUT is never practiced by competent realtors and in Toronto there are still huge bidding wars...

    A bidding war is not an ideal situation for a buyer but to buy a home in Toronto you will, realistically, still face one in most situations. The key is to look at past sales and determine the actual value of the home. Although the behaviour of a few irrational buyers and their agents (like the ones who do the 10Gs per offer thing) will influence the market, most buyers and their agents have more logical evaluations of what they are buying and it is still a relatively sane process. The key to real estate is to remove emotion and buy wisely. If you are competing against someone who is dramatically overpaying walk away - other bidding situations will most likely contain a pool of buyers without that one irrational buyer and you can get yourself a home at a more reasonable price.
  16. Chris A from Canada writes: as a real commercial real estate agent, it's this exact attitude and advise that kept me from being a residential real estate agent! With this kind of unprofessional guidance being given by so called "colleagues" why would I want to have my reputation tarnished by associating myself with this type of group?

    all i have to say is my sincerest apologies on behalf of this profession. 90% of realtors are actually very educated individuals who approach this profession in a very ethical and honeswt manner.
  17. Phil M from Toronto, Canada writes: Didn't the G&M put an article online just last week about how bidding wars are now essentially a thing of the past in Toronto due to reduced demand? Lol, realtors are terrified of a slump, so the shills are out fanning the flames to keep the overheated market surging a while longer. In the meanwhile, Jan, Feb, March, and so far, April have all experienced significant drops in house sales compared to last year, economic forecasts for Ontario and Canada have been revised to reflect a longer, more serious recession, and the UK market is joining the American one in meltdown.

    Good thing all the realtors keep reminding me Garth Turner is wrong, otherwise I might get worried.
  18. J Kooman from Canada writes:

    No reasonable person needs to know how to win a bidding war.

    The key is not to win a bidding war,

    but to have enough to pay for the mortgage and keep the house.

    ...
  19. days ofcoleco from Toronto, Canada writes: The writer of this "article" needs to go back to real estate school.
  20. bill k from Canada writes: This pathetic propaganda form RE agents shows just how bad the situation is getting in Canada and toronto. Houses are sitting on the market and are not selling. In fact people are low balling by $30,000 and in some cases $50,000. This buddy of mine can not believe his house can not sell and it's now almost four months. Even I think his price is fair but buyers are not willing to buy at the top of this inflated bubble market.
  21. Tom Sawyer from Canada writes: Multiple bids are still occuring in mid town - Bayview / Eglinton area - Toronto. People are definitely assessing the value independently of the listing price especially those that know the area. The higher end of the market ($ 1,000,000 ) is definitely softening and I am seeing prices coming down and houses sitting.
  22. J L from Toronto, Canada writes: bill k writes: "This pathetic propaganda form RE agents shows just how bad the situation is getting in Canada and toronto"

    Bill K - where do you live? I can assure you there are multiple offers all over Toronto from Bloor West village to the Beaches to Yonge and Eglinton to dowtown to Etobicoke... But just like before not every property goes in multiple offers - if a home in a prime area is priced competitively or below market value you will still get multiple offers. If you need proof just ask a local agent to provide you with a list of all the sales over the last month and see for yourself.

  23. Jim Hester from Mississauga, Canada writes: Let's see who benefits:

    Seller - more money
    Agent - more money
    Bank - more money

    Buyer - thanks for coming out. See you in 5 years when you hopefully get payback - assuming a continued strong market in a have not province.
  24. B to the A to the R to the T from the left coast, Canada writes: What a load of rubbish. Even in the Vancouver market houses sit longer and if there is a bidding war its because some agent under estimated the asking price. I've bought 3 and sold 2 properties in my life. I bought two with agents but sold both, fast, by myself. I use realtors as appraisers only.
  25. aniphylactic shock troops from Victoria, Canada writes: Bidding wars are yesterday's news and buyers should work with agents who don't pressure them into writing cheques that are $10K bigger than they're comfortable with.

    That said, an earlier poster complained about listing agents "holding offers to induce bidding wars" as a means to "increase their take on the sale."

    Now, I realize most people on these comment boards are innumerate and possibly illiterate, but 1.5% on $10K is $150. If anyone thinks an agent is going to hold back from closing a deal that pays him several thousand dollars so that he can squeeze an extra $150 out of it, well, you're a b00b.

    And a listing agent's job is to get as much money as possible for his client. Buyers are under no obligation to bid on a house. None whatsoever. So stop whining. People are such babies and always want to blame somebody else. Real estate agents are a whipping boy for crybabies and losers.
  26. Guy Nick from Toronto, Canada writes: If you haven't bought real estate in Toronto and are commenting on this article, you're in over your head. Many, many properties go into competition here and sell very quickly, unlike most other markets, where you ask the most you think you can get and then start discounting, often over a span of many months. If you pay $450k, it makes no difference whether the starting price was $50k lower or $50k higher. The house goes for what the market will bear.

    Downtown is still very hot -- friends of mine finally just bought after losing out in nearly a dozen bidding wars over more than a year. Try telling them they can get a house by bidding lower.
  27. Puzzled One from Canada writes: I have bought three homes and sold two and have walked away from several lovely homes without submitting an offer because of bidding wars.

    Buying a house is not a war or a competition-- due diligence is required. Bidding wars frequently require buyers to submit a firm offer, waiving a home inspection. Anyone who buys a home-- even a new home-- without employing a reputable home inspector is foolish.

    Houses are like buses (TTC strikes notwithstanding)-- if you miss one, another one will be along.
  28. white wolf from Canada writes: cheaper to rent a tunnel boring machine and make a home in the side of a mountain
  29. a fox from Toronto, Canada writes: One thing they did not mention, which I think helps is to try to be the very last party to register your bid thereby you know how many total bids there are and can adjust your offer accordingly.
  30. ken g from Canadian in Mexico City, Canada writes: Isn't there some information on how the real estate agents create bidding wars? Good points on who benefits - where is consumer protection?
  31. Joe Smith from Toronto, Canada writes: The supply-demand balance that has prevailed in Canadian big cities for the last 5-6 years is a product of the minimal down-payment, 40-year-mortgage crowd. When economic realities (high dollar, impending recession) leave them unable to keep up with their payments, other recent home-buyers will find their investments devalued as housing supply starts to exceed demand, especially in the $500k market. All signs point to a US-style meltdown sooner rather than later -- just too many unqualified buyers.
  32. RD Lone from Vancouver, Canada writes: @ aniphylactic shock troops: since you are obviously a real estate agent shill, let me know next time you are charging 1.5% commission. Your kind basically spins up these stories so people are willing to pony up when they don't have to. If the real estate selling industry was nationalized we wouldn't have all of these ridiculous bubbles and unethical leeches in society (apologies to the few that are unfairly generalized). Only with real estate do we have such conflicts of interest and lack of transparency. A real estate agent is not out to maximize your gain, they are out to maximize their gain. For example, a seller's agent wants to maximize $/hours worked, so even if they know a house is worth $300k, they will try to unload if a $275 offer comes along (goal is to pass Go and collect $200 as fast as possible). A buyer's agent is trying to judge the maximum of how much you will pay so they get a bigger commission. They gain for making you pay more, not for making you pay less. If a house is listed by anyone offering less than the normal 5-6% commission, agents will basically ignore the house because they get a smaller take - even though the house is probably priced more competitively. The only way this money grab continues is because the industry refuses to be transparent; ensuring that you need to hire one of these goons to know historical pricing and other comps.
  33. J L from Toronto, Canada writes: RD Lone from Vancouver...

    Firstly, how would someone go about "nationalizing" real estate? The information on the MLS doesn't magically get collected - who would accurately record all the info - government employees, homeowners? There are 10s of thousands of agents doing this job as we speak. To analyze value, consumers need a heck of a lot more info aside from the sale price (i.e. days on market, conditions of sale, sizes of rooms, maintenance fees, style of house, square footage, HVAC systems, age of renovations, pool/no pool, types of driveways, parking, etc, etc, etc).

    Secondly, I don't see how anyone can stay in business by screwing their clients - it makes no sense to me. The industry wouldn't exist for a hundred years or so if that were the case.

  34. john shantz from Canada writes: People who list their homes below the market value hoping for a bidding war should be aware that should the house sell for their listed price (rather than a premium) they will either have to accept the offer or pay the listing agent the full commission on the listing price.
    You can amend the listing agreement to account for this but don't expect your agent to suggest that.
  35. J F from Toronto, Canada writes: Bidding wars still exist. I know because I was in one last month in one of the "hot" neighbourhoods. There were 4 bidders. We bid $40,000 over asking and got the house. But not because we followed the $10,000 per bid rule. Because we looked, with the help of our agent, at the selling prices of several comparable houses in the neighbourhood and judged accordingly. And, because after many careful calculations, we felt we could afford it. So don't be so quick so criticize anyone who gets into a bidding war. In certain places, it's still the reality. Trying to avoid one might mean not buying a house. By the way, we actually paid $30,000 less than what our agent said it would go for and the same price similar houses in the neighbourhood were going for a year ago. So despite the bidding war, we feel we got a good price. Now we look forward to enjoying our first home.
  36. REV eighteenseventeen from Canada writes: HOHOHAHAHAHOHO LOL, good one. Things are done a little different in Ontario than in BC. Not too many bidding wars in my neck of the woods. Where I am is has one of the fastest growth rates in BC. Lots of new homes being reduced and not selling.
  37. REV eighteenseventeen from Canada writes: john shantz from Canada writes: People who list their homes below the market value hoping for a bidding war should be aware that should the house sell for their listed price (rather than a premium) they will either have to accept the offer or pay the listing agent the full commission on the listing price.
    You can amend the listing agreement to account for this but don't expect your agent to suggest that.
    _______________________________________________________

    I'm not sure what school of law you got your info from, but it is not accurate on the most western province of Canada.
  38. J L from Toronto, Canada writes: john shantz writes "People who list their homes below the market value hoping for a bidding war should be aware that should the house sell for their listed price (rather than a premium) they will either have to accept the offer or pay the listing agent the full commission on the listing price.
    You can amend the listing agreement to account for this but don't expect your agent to suggest that."

    That is definately not the case in Toronto and surrounding areas... I doubt it is the case elsewhere either.
  39. Peter Stern from Toronto, Canada writes: The best way to WIN overall is to avoid bidding wars altogether. If an area is sooo high in demand that everything goes way over list, then find another area. If the list price is below market, offer the full list and have a firm idea of what you want to spend, but also have a firm idea of the things the place needs and have a firm idea of alternative properties and alternative areas. But hey, if you've got more money then common sense and you must have a specific property in a specific location (and thereby destroying your bargaining position), then by all means... bid away your savings. If you actually care about not paying too much and minimizing the chance of losing money on your investment (yes it can happen... it did happen to many people in 1982 and also in the early 1990s and is starting to happen again), then any kind of bidding war should be avoided at all cost. When the selling agent says there are competing offers, this is complete BS sometimes. With the first condo I bought, the agent tried to pull that on me... I walked and told the agent to let the other person have the place... and kept looking. 3 days later, I get a call and was told the place is still for sale and they wanted to know if I'm still interested. I was, and I ended up buying it... but they didn't get full asking price and I ended up making a reasonable return on the condo when I moved about 8 years later. But had I fallen for the BS, I wouldn't have made as much money. And if you're in a situation with competing offers, stick to your budget... and let the seller know that their property isn't the only one you're considering... and always be prepared to walk away.
  40. Rachel Jerome from Calgary, Canada writes: Real estate stats are sinking people! Bidding wars are OVER. A friend of mine in DT Toronto had over 200 groups of people through her home that was "priced for a bidding war" and they didn't get a single offer. This place is tricked out too.

    The only people who are buying houses now are people who are going to lose money. This is the top of the market! People will have to live in these house for years with inflation to realize any investment. The bubble is bursting and people will lose their homes when interest rates climb back up. they might not climb today, tomorrow or in a year but watch. We are in for a treat of foreclosures soon!
  41. Peter Stern from Toronto, Canada writes: Oh... and I just bought a house about two months ago in Toronto... the price was a little below market in my opion based on initially screening 25 houses in more or less the same area of Toronto. I think the people selling wanted a bidding war... only problem was that they had it on the market for a month and my offer was the only offer that came along and I ended up buying it for a little under list. But even if I didn't get it, I had 7 to 10 other properties as backup options... and when I went to look at the house (with the current owners there), I didn't hide the the 2 - 3 pages of a spreadsheet I printed out that I was making notes for each property on. There were around 25 properties that passed my initial quickie assessment that I had on those printouts. One of the other properties on my list did end up in a bidding war and went for (in my estimation) $25,000 more than it should have. A lot of people just don't understand that when it comes to expensive things like houses, what it is worth is only what *someone else* is willing to pay... and if you are bidding against someone with more money than common sense, it is always better to walk away... because if you win a bidding war against someone like that, you will have won the battle of getting the house... but you will have lost the war of getting a house you want at the price you want.
  42. Erik D. from Ottawa, Canada writes: And one wonders why there are housing booms...of course these agents do this for a percentage commission, no incentive to get higher bids...
  43. bill k from Canada writes: Rachel Jerome from Calgary, Canada writes: Real estate stats are sinking people! Bidding wars are OVER. A friend of mine in DT Toronto had over 200 groups of people through her home that was "priced for a bidding war" and they didn't get a single offer. This place is tricked out too.

    Bidding wars are so 2006-2007 and unsold homes with be the new 2008. Homes are simply not selling and many people are in fear of the coming crash and look to get out while the getting out is good. The current recession in Ontario will continue to get worse just like the situation in the US. You can see the fear from some posters. POP.....what was that?
  44. A K from Toronto, Canada writes: If my agent ever tried to pull that, I'd walk. No house is worth being that house poor.

    Who are these deluded people paying these obscene prices for houses and their 40 year mortgages?

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