Don't Lose Your Head: How to Survive a Bidding War
It's crazy out there. The spring real estate season is well underway and as a result hundreds of Torontonians are suffering from PBWS (Post Bidding War Syndrome). Common symptoms include dizziness, lack of sleep, and a major case of the shoulda woulda couldas.
For the uninitiated, bidding wars occur when properties are listed at a price that is below their actual market value, and multiple buyers submit offers at the same time. In a hot market like we've been witnessing in Toronto for the past few years, multiple offers have become commonplace.
I've been involved in a few bidding war situations with my clients over the past several weeks, and I thought now might be a good time to share some tips on how to survive these situations with your head intact.
1. Know the property's value. Having a firm grasp on a property's actual market value is essential in any real estate transaction. This is where your agent earns their lunch. Providing you with the best possible information on value is not a nice-to-have, it's something you should demand from your agent.
2. Know your comfort zone. With my clients I always make a point of distinguishing between the maximum amount they can afford and the maximum amount they are comfortable with. The two are almost always not the same. Know your comfort zone and make a commitment to stick to it.
3. Have a strategy. This one seems obvious, but again, this is where your agent comes in. You have to anticipate how the bidding war will play out and formulate a negotiating strategy accordingly. No two bidding wars are the same and every listing agent handles them differently.
4. Wait for the next one. Paying more for a house than it is worth doesn't make sense in any market. A common side effect of bidding wars is that other home owners on the street see what has just happened and put their property on the market shortly after. The early bird gets the worm, but the second mouse always gets the cheese.
5. Keep your head on and have an EXIT strategy. Buying a house is an emotional experience. Being in a bidding war situation takes those naturally occurring emotions and cranks them up by a factor of ten. A lot of heads are lost and poor decisions are made as a result. Sit down with your agent beforehand and figure out what your breaking point is and what is going to make you run for the Exits-and stick to it!
How about you? Care to share your tales from the trenches of your own bidding war experiences? Drop us a line in the comments section.
Comments (10)
I moved here from San Francisco 2 years ago (where the real estate war is second only to Manhattan), and Toronto really surprised me. It absolutely IS crazy in the downtown core. We just bought a house in Roncesvalles village, and I can tell you from recent experience that all of these tips are SPOT ON. It took us 3 tries before we won the bidding war (the first house having 10 bids and going 21% over asking - craziness). Knowing the true value of the house helped make loosing sting less, because we knew that they overpaid and we stuck to our guns and didn't. It also helped us to wait to submit our bid until just before offers were due, because we could gauge from the house insections and registered bids just how bad the war would be.
huh - not a post i was expecting to read here, but really great to see! the variety should be encouraged. as one who is just getting psyched to enter the market, this kind of candid stuff is a great read.
Thanks for the feedback Beth and Chris.
Sounds like you after only 2 years in our city you are a Toronto real estate veteran, Beth!
Chris, brace yourself for a wild ride!
it doesn't make sense for this city to have a bidding war considering the supply of condo units is so high in downtown toronto.. I don't believe the population growth is keeping pace with the supply
There's far more to the real-estate market in Toronto than condo units downtown.
I'd also suspect that the majority of buyers aren't even considering them.
Jack, bidding wars are a direct result of basic supply and demand principles. There are more buyers than sellers in the market right now, hence rising prices and bidding wars.
Jonathan, you're correct, downtown condos represent only a small proportion of housing in this city.
My boyfriend and I just went through this. We found a place we really liked and decided to put an offer on it. It was around 550 sq ft and one of the things we liked about it was how economical it was. The people selling decided to accept offers at a set time and there were 4 offers put in. The bidding put the price WAY up immediately and we were asked if we wanted to adjust our price. What was a small, affordable place had just become a small, unaffordable place so we decided to exit. We were disappointed but we knew we'd find something else -- and we did a week later.
We found an older building that had recently been renovated and were able to get a 1000 sq ft place for the same price! We were the first to put in an offer and it was accepted right away. We love our new place and can't wait to take possession.
My advice is to not get too upset if you lose out of a bidding war because sometimes you find something even better than the place you initially thought was 'perfect'.
There are only a few high demand areas in Toronto that are still attracting bidding wars. Most of the city and surrounding area is seeing more balanced markets now.
Cave Spot
http://www.cavespot.com
Toronto Real Estate Discussion Forum
your fifth point is well taken, a good EXIT strategy is a good idea. well done andrew. b & c should take note and l & i will try to keep our heads on in our future bidding wars.
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