April 21st, 2023 | Bidding Wars
Offer deadlines are back!
Here’s what you need to know if you’re a BUYER/INVESTOR looking in this market.
Preface: While we’re seeing a lot more activity – activity DOES NOT mean we’re going back to yesteryears prices .. not this year anyway (IMO). So, that’s good news! We dislike propagating misleading info that only adds to the craze … so please, don’t stress, just get informed so that you can adjust your strategy to coincide with the market you’re shopping in.
Ok – let’s get on with it …
What is an Offer Deadline? Offer deadlines are when a property is listed (well) below market value in hopes of achieving market value + some margin (based on the subjective value or demand in that market). A property listed Mon to Wed one week, will take offers the following week Mon-Wed, and all Buyers are encouraged to bid on that date – the more bidders (Buyers), the more likely that the property will sell above market value .. and hence new (pricing) norms are established and markets trend UP or DOWN in this way.
Why are they back? Because we’re seeing a backlog of demand vs supply.
Why is supply so low? Well, this has been quite common across the GTA and certainly in Toronto proper – fewer homes (at least fewer nice/desirable homes) vs Buyers looking. Today, the key reasons is that many of the homes on the market are being brought on by MOVE-UP Buyers, or DOWNSIZERS – both of these demographics will typically opt to find a home first (i.e. their larger MOVE-UP home or their smaller DOWNSIZE home) prior to listing their home. This then means that until the Sellers have bought, their inventory won’t hit. Period. Meanwhile, you have Buyers hitting the market each day, week and month … and the issue grows exponentially in many ways.
The key reasons this happens today is 2-fold – INTEREST RATES are much higher vs years past & Sellers aren’t willing to give up what they have until they’ve secured their next home. So, we face an inventory shortage issue.
In the past, when interest rates were super low, homes could see gains week-over-week (day-over-day!).
Today, it’s a bit different. Buyers can’t just pay whatever – why? Because the rates dictate how much a Lender (Bank) may be willing to loan, not to mention appraisals. So, we’re not terribly worried that home prices area runaway train (yet).
However, the level of market activity has picked up significantly, for all the reasons stated above.
So, to get ahead as a BUYER/INVESTOR, here’s what you do:
- Get in to see properties EARLY
- Due your due diligence up front and quickly
- Review any/all docs and get comfy with the same (Inspection etc.)
- Have your deposit in an account that is ready-to-go (no GICs or locked funds)
- Don’t compete for properties you know (or ought to know) will sell well above your comfy range … which brings us to the next point …
- TRUST YOUR REALTOR … your Realtor should be able to pinpoint an accurate range for any property you may consider, regardless of the asking price … and this brings us to the next point …
- ASKING PRICE when on offer deadlines is as arbitrary as my answers on multiple choice exams … might as well be $1 … your focus should be on TRUE MARKET VALUE
- If you don’t think you’ll win the race … don’t compete – period! Why? Because, competing in a race you can’t win only adds fuel to the fire and ultimately serves to price you out of the neighbourhood(s) you so desire
- Have a plan – don’t go into an offer night and start crunching numbers – have Scenario 1, 2 and 3 mapped out, take as much emotion out as you can … the more objective you are, the more likely you will win
- Keep CALM and CARRY ON .. you may lose 1, 2 or 3 bids, don’t worry, unfortunately that’s part of the process .. Usain Bolt lost 5 of his first ever professional races .. and went on to claim the world’s fastest everything records … (I made the lost part up .. but you get my drift)
Thanks for listening homeys … now lets get out there and show them who’s boss!! A+A
