How to create a ‘bidding war’ when selling your home

By: Eddie Donan

How to create a ‘bidding war’ when selling your home

Tags: Homes in Richmond Hill, Homes for Sale Richmond Hill, Homes in Bradford, Homes for Sale in Bradford, Multiple Offers

By: Eddie Donan, Broker

If you have been following the Real Estate Market in the GTA for the last couple of years you have probably come across the terms “multiple offers” or “bidding wars”. Certainly, you have probably heard the phrases ‘sold over asking’, or read an article about a home that sold for $200,000 more than the listed price. How is this possible and how does this occur?

First of all let’s start by defining the terms “multiple offer”/ “bidding war”. A multiple offer scenario takes place when a particular property receives an offer from more than one potential buyer at the same time, thus the seller has more than one offer to choose from. When this happens, buyers are said to be competing or entering a bidding war for the desired property. The result of such bidding war definitely favours the seller of the property as often buyers compete to ‘win’ the house by increasing the price they offer and making their offer more attractive by removing frequent conditions such as financing and inspection in an attempt to make their offer more attractive to the seller. Commonly in this seller market, a ‘bidding war’ will result in a property selling above the asking (listed) price, and often setting a new record price in the neighbourhood.

When selling your home a multiple offer scenario can be created intentionally by the Listing Salesperson, this is often the most common approach. This is done by putting the property on the market and not accepting any offers until a particular date (often 5-10 days from the day the house comes on the market). By doing this, the sellers achieve two very important things:

  1. They can effectively allow a large number of interested buyers to view the property and eliminate the risk of selling the property too quickly without it being properly exposed to the market.
  2. By accepting offers on a particular date and not any time before  all offers if any will be submitted and reviewed on that date at the same time, thus creating the desired bidding war scenario.
Strategies for creating and maximizing a ‘Multiple offer’ scenario
 
  1. Price correctly- In order for your property to attract enough interest from prospective buyers it must be priced attractively. Strategies and prices vary depending on the agent handling the sale and particular neighbourhood statistics. However, it is key that the price is carefully chosen based on recent sales of comparable properties, current similar homes available for sale, and other information such as number of offers received on previous sales, etc.
  2. Know your area- This is vital for the sale of ANY home. Every area reacts different to various marketing strategies. For example, there are some neighbourhoods where homes sell on average for $100,000-$200,000 above the listed price and this is the norm for that area. While there are other neighbourhoods where bidding wars do not occur, thus it would be unwise to choose this strategy in such places. The key point here is to be well informed when selecting this strategy to sell your home.
  3. Give enough time- This is extremely important. Allow between 5-10 days from when the house comes on the market before accepting offers. The actual time you wait will depend on current inventory levels and demand in your area, but enough time should be given in order for the home to be viewed by all potential interested parties.
  4. Pre-Listing inspection-  As a seller, you will ideally be looking for an offer with no conditions (Firm Offer). By having a professional home inspector conduct an inspection on your home and including it in your marketing of your home buyers will be able to know ahead of time of any potential updates needed on your home. This is ideal because they will be more likely to no conduct their own inspection (removing the condition), and it will reduce any potential liability on your end later on since you took action to disclose and make available any potential issues with your home.

It is key to know your market statistics and current trends in your area. There are several factors to consider when selling a home such as price, condition of the home, and location. Happy selling everyone!