This is a controversial topic depending on which side of the fence your sitting on, are you a buyer or a seller? If you are the buyer then it could amount to some huge stress and fast decision making, if you’re the seller it could also add huge stress and some sleepless nights throughout the process. How so if I’m the seller? Well you might not receive any offers on the offer date!
The trick to a successful sale generated through a bidding war in the Toronto Real Estate market place from a sellers point of view is simple, hire the right agent who has experience not only with dealing with multiple offer situations but he/she has an abundance of knowledge of the recent sales activity in your neighbourhood. Price the home well below market value, have a pre inspection report for a prospective buyer to review and have a solid marketing strategy. A good idea to help promote the home would be conducting at least 2 agents open house through the 7-10 days prior to the offer date, a public open house throughout the weekend at a minimum of 4 hours per day. Another great tool in helping promote the property would be launching a PAY PER CLICK CAMPIAGN through online search engines like Google and Facebook. A Real Estate Agent with experience would most definitely suggest these strategies prior to listing; in the event that the Realtor does not mention these ideas as solutions then that is a red flag from the sellers prospective! Remember in order to generate a 10 offers you will need to generate at least a hundred viewings throughout the 7-10 days of the house being on the open market. Think of it as the 10% rule, if the property is marketed correctly then you should receive a 10% return of the viewings coming back with a bona fide offer.
Now let’s talk about the buyers prospective and what needs to be done prior to the offer date. Time is of the essence when dealing with this type of situation, the first thing I suggest is to always try and view the home as soon as possible, this will give the buyer time to think if the home meets their criteria without rushing into making a hasty decision. I would also suggest having a home inspection done prior to the offer date in the event the seller has not provided one. (Please note that you will be incurring the cost of a home inspection and you haven’t even bought it yet) Having your mortgage commitment from the lender is also very important has this will allow the buyer to purpose an offer amount that won’t exceed their means which in turn will allow a successful closing.
The Realtors role is very important as he/she will strategize the offer price, terms and when and how to present the buyers offer to the seller. Price should be determined by not only true market value but by also by how many offers are registered with the listing agent, remember the 10% rule, for every offer registered you must add 10,000.00 to the above asking price. (Other factors also play a huge role. Such as neighbourhood, type of home and how well the home performed in its inspection report) a firm offer with the highest amount of dollars is what the seller is seeking, so in order to be successful in the process it’s very prudent to have done your due diligence prior to the offer date. Here is a little tip for all your Realtors, always register the offer with the listing agent at the very last minute, this will help in keeping the others lower and help your buyer in making a better decision with the dollar amount that should be offered. Also buyer be aware that in the event that you are successful in the bidding war that you will have one more hoop to jump over! The appraisal, all mortgage commitments are written that the property must appraise for market value or below.
My advice to both buyers and sellers is to stay away from this tactic, sellers should list their home for what they expect to receive according to current market value and buyers should be patient when home hunting as another listing will emerge.