For sellers, bidding wars or multiple offers from buyers are a dream come true. We witnessed numerous examples of this in the US and in many parts of Canada before the stock market meltdown of 2008, however for the most part, that is no longer the case. Yet even in today’s balanced market, bidding wars continue on specific properties in certain areas.
Although we are seeing many examples of multiple offers, it does not necessarily mean that buyers are over paying for properties today. In most cases, sellers are offering their homes for sale at 5-10% below market value and are thus generating interest among several buyers, who then bid up the property to an eventual sale price that is either very close to or slightly higher than the actual market value.
It is very important for sellers when they interview potential real estate agents to ask questions in regards to their experience with multiple offers they have worked on in the past for sellers. If possible, call these sellers for verification. Look carefully at the comparative market analysis done by each agent. This report will show all the homes that are similar to your home that are for sale in your neighbourhood as well as details as to what similar properties have sold for in the past 3-6 months. You should consider arranging a visit to some of these properties to see whether there are any differences in the improvements both inside and outside the homes, as well as other advantages, such as, does the home back onto a park or ravine?
Studies show that the most motivated buyers will look at a property within the first 2 weeks of listing. That is why your sale price needs to generate interest immediately. Once you do settle on a price, you may want to consider listing your property with the provision that no offers will be considered until 5 days after the property is placed on the MLS© system. Not only will this generate interest in the property, it will also provide prospective buyers with the opportunity to tour and conduct home inspections in advance so that they can potentially submit an offer to you 5 days later with no conditions.
However, many buyers are very reluctant to pay the costs of the home inspection in advance, as they have no guarantee that their offer will be accepted later. They then decide not to participate in the bidding process at all. What some astute sellers would do in these circumstances is pay for a pre-listing home inspection, by a reputable home inspection company, and making the inspection report available to potential buyers. If the inspection report identifies certain deficiencies, the seller can repair these problems and show the receipts to potential buyers confirming that the problems have been corrected.
Although buyers are always encouraged to conduct their own separate home inspection, it has been my experience that when sellers make a reputable inspection report available to buyers, it generates interest from potential buyers as they become more willing to make a bid on the property while taking some comfort in the accuracy of the report.
I have also noted that some real estate brokerage companies who act for sellers make it a policy that after the bidding is complete, they give out the names of the competing brokerage companies to all parties, to verify that when they said that there were 5 offers, there is no suspicion later that the seller or the seller’s agent may not have been telling the truth about the number of offers received.
By providing a home inspection report in advance as well as the names of the brokerage firms involved, the seller will demonstrate more integrity in the process and at the same time, create an environment where they are likely to receive multiple offers. That is just smart business.
Do not get carried away. You still need to listen to the guidance of your agent during the negotiating process. We are not in 2008. Yet due to low interest rates and the current balanced market, properties that are priced correctly should sell for their correct market value.
Sellers, create the environment that will generate bidding wars on your property and then enjoy the ride.
Mark Weisleder, LLB, REI, is a lawyer, author and public speaker for the real estate industry. You may visit Mark at www.markweisleder.com or contact him at mark@markweisleder.com.
