Sellers, this is your moment. You have almost all the leverage in the market these days.

Sellers have actually been in control of the market for years now, and there is no sign of it letting up.

Short periods of uncertainty have given buyers tiny windows of opportunity here and there.  For example, Ontario introduced the “Non-Resident Speculation Tax” for the Golden Horseshoe in spring of 2017, and everyone wondered if balance would return.  By the time the stats came out in 2018, though, it was obvious that values were still climbing and demand for real estate was still very strong.

Then, of course, 2020 roared in with its own version of insanity.  Surely, the March 24th order to close down all non-essential work places in Ontario would cool off the crazy, overheated market?  Maybe for a minute.  This snapshot from the Realtors’ Association of Hamilton-Burlington shows how quickly buyer demand became pent-up and, by June 2020, Sellers were again in full control.

Bidding Wars Are Good for Sellers, Right?

Some frustrated buyers are convinced that they are being priced out of the market by greedy sellers and greedier realtors.   We empathize with them, especially when they are first-time buyers just trying to break into the market.  Prices have risen so sharply, and so quickly, that it has left most of us breathless, to be honest!  When we represent buyers who need to include conditions in their offers, and who lose out in competition time after time, we often share their irritation and resentment of the process.

It may be hard to believe, but it can also be stressful to be on the seller side of the table when there are multiple offers.  Since a seller is most often also a buyer, it is very important that they choose the best offer for them.  They will shortly have to put their best foot forward to compete on a purchase of their own, if they have not already done that.

Deciding How to Handle Multiples – You Have Options

As the seller, you will be asked to provide direction on how to handle multiple offers during a bidding war, if one is expected.   You may choose to allow buyers to make offers anytime, ask for a day or two to consider offers that come in (24-or-48-hour irrevocable), or set a date and time to look at offers.

Regardless of what you decide, you may find yourself faced with a pre-emptive, or “Bully” offer.  This is an offer that is set to expire before your requested or set offer date.  The goal of the bully is to prevent other buyers from having time to make competing offers, or to force you to make a decision quickly.  Bully offers can be very attractive – over asking and without conditions.

The Real Estate Council of Ontario (RECO) provides direction to agents and brokers for helping seller clients to navigate the process.  Assuming you would like to set an offer date, the following questions can be helpful in deciding which strategy you want to use:

If a pre-emptive offer came in and you were not told about it, how would you feel?

How much information do you want about any pre-emptive offers that come in? Do you want to:

• • be notified of a pre-emptive offer, without seeing the details?
  • see the details, but not formally consider the offer until your offer presentation date?
  • consider all offers received before the offer presentation date? 
  • only consider offers that are above a certain price or contain a certain condition (for example, no inspection)?
  • not be informed about any pre-emptive offers at all?

Remax Hamilton agents will ask you to put your instructions in writing.  You have every right to change your mind partway through the process, but the adjustment to your direction also needs to be in writing, and all agents who have expressed interest in the property must be notified of the new instructions.  (You can’t just suddenly accept a high [or high pressure] offer and call it a day.  We are ethically bound to treat each potential buyer fairly, and that includes providing notice if the opportunity to bid on your property is changing.)

Here are a few things for a seller to keep in mind during the selection process:

• The best offer is not always the highest offer.   When considering the offers that come in, each seller will have a set of priorities, and the most common primary factor to be considered is price.  Sellers often, and understandably, give most of the weight to the dollar value of the offer.  However, there are other factors that can weaken a high offer and these should factor into the final decision.  For example, can you be sure that the buyer can come up with all the money he or she is offering? Have they been pre-approved for financing? If the lender does an appraisal and it comes up short of the agreed-upon final price, will the buyer have enough to make up the difference? A lower offer from a qualified buyer may be better than a high-risk offer from someone with questionable finances.
• Conditions create deal breakers.  Common conditions in offers may include a week for the buyer to secure a mortgage and obtain a home inspection.  Once in a while, they will ask for time to get an acceptable insurance policy or seek their lawyer’s approval on the paperwork.  Less often, in a seller’s market, there may be a condition on selling a property that the buyer already owns.   Faced with two offers for the same amount, how can a seller decide which one is the “better” offer?  The fewer conditions there are, the fewer loopholes the buyer has to walk away from the deal.  It gets more complicated when you have to compare a higher, conditional offer to a lower, firm one.  Most realtors would advise accepting a firm offer over a conditional one, even if it is slightly lower. (Within reason, of course.) This is especially true if the seller has already made a firm offer on their next property.
• Deposits contain clues.  A strong deposit is a sign that a buyer is not only serious, but also able to afford the property.  Since this is money that is held in trust until closing, it represents what they have to lose if they fail to hold up their end of the contract.
• Closing date could be a big deal.   Depending on your circumstances, the closing date could be a deal breaker – regardless of the offer price.  A buyer may offer top dollar, but insist on a quick closing.  For a seller with young children and nowhere to live until their new home is ready, this may not be the best offer, even it if is the highest dollar amount.
• Inclusions or exclusions.  Read these over carefully.  Is the buyer asking for things you didn’t mean to include? Typical inclusions are things like curtains, appliances, and maybe patio furniture.  If a buyer wants you to throw in the leather couch, your new OLED TV, the vintage T-Bird in the garage, or the family dog…it may be time to do some math and see whether they are truly the highest offer compared to others who only want to buy the house with the things you were offering.  If you have a rental contract on a furnace and air conditioning, pay attention to whether the buyers are asking you to pay that out or offering to take it over.  This contract alone can be worth over $10,000 in some cases.

We Are Here to Help

We have seen bidding wars with two competing offers, and we have seen cases where it took more than all our fingers and toes to keep track of all the offers on the table.  After a sale, we often hear from our seller clients that they are pleasantly surprised at how smoothly the process went.

We work hard to maintain a good reputation for treating everyone ethically so as to encourage our colleagues to continue to bring offers to our listings.  With the help of the amazing administrative team at our Remax Hamilton (Escarpment) office, we have developed a system for tracking interest, notifying interested parties, and keeping careful records to ensure that your experience with a bidding war is a positive one.

If you have any questions about this process – we are just a phone call away!