Why do sellers usually “hold back on offers” when selling their house or condo?
Why would they choose to list their property on a Tuesday, but not look at a single offer until the following Monday?
Allow me to be hypocritical for a moment and say that while this frustrates me to no end when I’m helping my buyer clients, I would NEVER allow one of my seller clients to NOT hold back offers themselves…
The other day, I emailed a current condominium listing to a client and informed her that “they’re holding back on offers.”
She subsequently emailed back and asked, “What does this mean?”
I often take it for granted that the general public doesn’t fully comprehend the way things are done regarding the offer process in residential real estate.
It’s no secret that the Toronto real estate market is red-hot right now, and “bidding wars” are common place. While I hate the term bidding war, it’s not uncommon whatsoever to see multiple offers on a property. It’s not always the property that attracts multiple offers, as more often than not, it’s the combination of the seller, the seller’s agent, and the strategic pricing involved.
Assume a house North Toronto is “worth” about $550,000. The old adage, “It’s only worth what somebody will pay for it” surely applies, but let’s assume that a group of experienced Realtors conclude that this is the value of the home. In our market, if you list the house at $549,000, you would probably be able to sell this house for “what it’s worth.”
But what if you want to get $650,000 for this house that is “worth” $550,000?
Try listing it at $489,000 instead of $550,000. This will attract far more buyers, and thus far more offers.
Any buyer with a ceiling of $500,000 will find this house at $489,000, but not if it’s listed at $549,000!
As a seller, you don’t care what people offer on your house—you only care how many offers you get, and what the HIGHEST offer is!
The more offers there are, the more the eventual highest offer will be!
Consider this: Mr. Jones decides to place an offer on this property listed at $549,000. There is ONE other offer from another buyer. Mr. Jones, therefore offers $558,500 in hopes of beating out the other offer, while slightly “overpaying” for this gorgeous home that his wife desires ever-so-much to start their family in.
But if the house is listed at $489,000, it may attract EIGHT other offers. Some of these offers will be people offering BELOW the $489,000 asking price, as the buyers are clearly ill-informed as to the happenings of the Toronto real estate market. With eight offers on a property, only a complete nutcase would assume he could offer $480,000 and buy this house. But it happens all the time.
So Mr. Jones is now competing against EIGHT buyers instead of ONE, and since his wife wants the house so desperately, he is tired of looking at open houses every Saturday & Sunday, he wants to move on with his life, and he convinces himself “We’ll be there for at least ten years, so the price we pay is nominal in the long run,” Mr. Jones subsequently offers $648,750 on the house to ensure that NOBODY else will have a shot at this.
This is how properties in Toronto sell everyday.
There are two sides to every coin. You hate the way things work when you are looking to buy a property, but you look forward to “Offer Night” like Christmas when you are selling your home.
This is just the way our real estate market works here in Toronto.
And I see no signs of the market slowing down…