Bidding wars and bully offers: strategies for success
June saw the Toronto housing market heat up in a very big way, with pent-up demand from a pandemic-impacted spring market happening in the summer instead. Inventory is down and demand is high, so (no surprise) multiple offers and aggressive buyer tactics are back on the table.
A well-priced property, plus a good building, great location and a seller’s market is the perfect recipe for bidding wars and bully offers. They can be great for sellers, but incredibly frustrating for buyers who keep losing out to higher bidders and folks jumping the line before the offer date.
What is a bidding war, exactly?
Also known as multiple-offer scenarios, it's when multiple buyers compete against each other to buy a property.
Here’s how it works: when a property seems particularly affordable, it attracts more buyers. And more buyers making more offers and counteroffers drives up the price – especially when emotions come into play. So by starting at an artificially low price, sellers tap into people’s competitive natures and can end up getting more than they would have if they'd listed it at market value in the first place.
Plus, a low listing price will attract those in a lower budget range – buyers who might not otherwise have considered the property, but might be willing to up their budget once they see how awesome it is.
So how do you win a bidding war? Your Condo Pro knows the best strategies, and will go over everything you need to know to “prepare for battle.” But before you do that, it doesn’t hurt to line up a few key tactics in your condo-buying arsenal.
Couple reading up on market values
Get a solid understanding of market value. Deliberately underpricing a property isn't a mistake: it's a sales strategy. When a seller lists well below market value and/or sets a date on which potential buyers can submit offers, they may be looking to bump up the price by starting a bidding war. Part of a winning strategy is knowing what that condo should be priced at, and that’s definitely something your Condo Pro can help you figure out. It also doesn’t hurt to visit condos.ca to track similar condos in your building and area - we’ve just added a new feature that lets you search sold prices for a unit and building, going all the way back to 2003!
Use your head, not your heart. Decide on your limit and stick to it. Don't let your competitive side (or that amazing view or the unbelievable gourmet kitchen) push you out of your price range. You will find another place that you’ll love.
Put in your best offer right away. You'll know right away if your best offer isn't going to win the property, so you can walk away and put your time and energy into finding another place instead of going back and forth a bunch of times. You also don’t want to try to “game” a bidding war. Trying to guess what other people are offering and basing your offer on “what ifs” won’t work. The hypothetical $2,000 you could have saved could also be the $2,000 that stopped you from winning the bidding war.
Go in firm. That means no conditions for financing and home inspection. Set yourself up by getting pre-approved by a mortgage lender (more on that here). And waiving the home inspection condition doesn't necessarily mean you can't do an inspection: if you feel you need one, some sellers will allow you to send in an inspector before the offer date.
Be accessible. Bidding wars move fast, and not answering a call because you're in a meeting or you forgot your phone at home could put you out of the running. So keep your phone on you, tell the folks at work you may need to take an important call, and postpone vacations or weekends away.
Be ready to walk away. Put in your best offer, but be prepared for the chance that another bidder will top it. Tell yourself you did your best, learn what you can from it, and try again with another property. Don’t let emotion or the need to win take you beyond the budget you set for yourself.
Be decisive. Take too long to decide on that counteroffer, and the win could go to another buyer who submitted theirs faster.
Skipping the bidding war: the bully offer
Buyers frustrated with losing multiple bidding wars occasionally turn to another, more aggressive tactic: the bully offer, also known as a bully bid or pre-emptive offer.
When a seller puts a property on the market, they can accept offers right away or set a date when they’ll accept them. A bully bid is when a buyer makes an offer before that day, jumping the line with a firm bid that’s well above asking. The hope is that the seller will say yes because it's an attractive offer, and because it’s easier to deal with than multiple showings and a storm of offers on the offer date.
Whether bully bids are fair is open to debate, but they happen. We've seen plenty of situations where hopeful buyers didn’t even get a chance to make an offer, with listings only staying on the market for a day or two before being snapped up. If you’re thinking about making a bully bid, here are a few pointers:
Be prepared to move fast – have your financing ready to go, and make sure your offer is firm and you have a cheque to hand over right away.
Know exactly what the condo is worth – keep track of sold prices every week, if not every day, to ensure what you’re offering is attractive to the seller, but not above reasonable market value.
Listen to your Condo Pro – they've done it before and can counsel you on what works best.
Real Estate Agent on the phone in a bidding war over a home
What if you're selling your condo and get a bully bid?
Keep a close eye on what similar units in your building and area are selling for. Sometimes a bully offer is the best price you'll get – but sometimes it's not, and having up-to-the-minute market knowledge can help you guess what kinds of offers might be waiting in the wings. You also want to be sure that if you are accepting a bully bid, that it’s firm and sure to close.
It’s a competitive market out there, so it's no wonder words like “war” and “bully” have become common real estate lingo. Your best bet is to stay informed, be ready to move fast – and work closely with an experienced area or building specialist who really knows your niche and can steer you towards success.