Unless you’re living under a rock (or outside of Toronto), you probably already know that the real estate market is HOT – bidding wars are the norm these days for ‘good’ houses in ‘good’ neighbourhoods. If you don’t know what I’m talking about, check out our blog: Is $200,000 over asking the new $100,000 asking?
For months now (years?) Sellers have been pricing their houses to generate bidding wars: they price a little below what they think it will sell for in order to attract attention, their real estate agent goes to great effort to market and show the property to as many people as possible and they set a Magic Offer Date, usually 6 or 7 days from the listing date (this is called withholding offers). The hope is that on the Magic Offer Date, multiple people will have fallen in love with the house and the competition for it will drive the price up.
Breaking news: it doesn’t always work.
We see it all the time: houses set up to generate multiple offers that don’t sell on Magic Offer Date. What could have gone wrong?
- The Weather – Real estate is an extremely seasonal business – if the sun is shining, people are out buying homes. Rainy weekend? Your Realtor will be playing Angry Birds through your open house because all the Buyers stayed home. In 2012, the spring market started earlier than usual and it seems to be slowing down earlier too. What does that mean to you as a Seller? Fewer Buyers and less competition for your house.
- Competition – How much your house sells for and how long it takes is dependent on what else Buyers are looking at. If there are lots of other properties in your neighbourhood or price range on the market at the same time, the likelihood of multiple offers decreases. This is why we always encourage people to list in February, when there are the fewest houses on the market.
- You got Greedy – Yes, this spring has seen some pretty phenomenal record-setting prices, but at the end of the day, your house is only worth what someone is prepared to pay for it. It’s nice that you thought you’d get $100K over what your house is worth because your neighbour did, but greed won’t get you more money. One of our greatest pet peeves is the Seller who prices their house at $699K, gets 3 offers on Magic Offer Date and turns them all down because they really wanted $800,000. If you want $800,00, price your house at $800,000.
- It’s the Wrong Kind of House…or it’s a Condo. Multiple offers most frequently occur for renovated, well-staged houses on hot streets in hot neighbourhoods. Contractors and investors won’t likely pay more than your house is worth-it’s all business to them. Because there are more condos on the market than houses (especially detached houses) and the likelihood of another condo identical to yours coming up for sale is great, bidding wars for condos are fewer and less competitive.
- Buyers are Tired of the Game. We see this every year – there are only so many bidding wars a Buyer wants to lose before they start to hate the game and will avoid it at all costs.
So what’s a Seller to do?
- Talk to a real estate agent who knows your neighbourhood and what’s going on in the market – they’ll be able to help guide your pricing decision and whether or not you should try to generate a bidding war.
- If Buyer fatigue is a problem in your neighbourhood, you may end up getting MORE for your house by pricing it higher and not withholding offers. Of course that might mean you get an offer on Day 1 and that’s not a bad thing if you get the price you want.
- Don’t count your chickens before they’re hatched – the market will dictate how much your house is worth. Don’t make any assumptions.