You hear the term “bidding war,” and you already have your back up.
It’s unfair, it’s awful, it’s greedy.
It’s the slimy listing agent. It’s the greedy seller.
But would you believe that sometimes, a bidding war happens by chance, luck, fluke, and a set of circumstances that have nothing to do with intent? Let me tell you a story from earlier this week where I can say without question, “This has never happened to me before….”
It’s awful. It gives you a bad feeling in the pit of your stomach, and if you’re a prospective home-buyer, you automatically want to cast a finger in somebody’s direction.
If you’re a home-owner already, you still feel sick by the mere mention of the term. You start to recall your foray into the real estate market years ago, and you sympathize with the plight of today’s buyers.
You say “tomato,” I say “tomatto.” Are there actually two “t’s” in that, or is it just how you pronounce it?
A pessimist says “bidding war,” and an optimist says “multiple offer scenario.”
A realist calls it “the Toronto market.”
When I meet with a prospective buyer for the first time, I’ll tell them in no uncertain terms, “If you’re looking to buy a single-family home in Toronto, you will be in competition at some point.”
That’s the nice way of putting it. The truth is probably more, “You will be buying your house in competition, and you might make multiple attempts, against other bidders, before you’re successful.”
I say this in advance to let buyers know what the market is like, but also to clear up any delusions they might have.
I’m looking for that buyer who says, “I refuse to do one of those ‘bidding war’ things. That’s not me. Not a chance.”
Well, God Speed, buddy! You choose to call it a “bidding war” out of spite instead of acknowledging that when a $599,000 listing comes out at Coxwell & Danforth, there WILL be more than just you and your girlfriend who express interest in the home, and your expectations that you can buy without being in competition at any point are nothing more than wishful thinking.
When there are four offers on a house, you can call it “a bidding war,” but I call it “Tuesday.”
So ask me then: at what point do YOU call it a “bidding war?”
I suppose it’s when the process goes into a 4th and 5th round. I find that to be unnecessary, greedy, and dare I say, unprofessional, since you can’t get parties to a 5th round unless you lie repeatedly to get them there.
What do I mean by “round” to begin with?
When eight offers materialize on a property, and the listing agent reviews the offers with his or her seller, and then go back to the top four offers to ask them to “improve,” then that constitutes a second round of bidding.
In 2015, we rarely ever see just one round of bidding, although that’s the way many of us would prefer the process to play out.
We almost expect at this point that we’ll be “sent back” at some point, if we’re in the running, although you don’t always have to improve. I sold a house last week for $880,000, against four other offers, where the top two – myself included, were “sent back to improve.” I didn’t even ask my clients – I just stayed put. I could tell by the listing agent’s demeanor that we were way ahead. She didn’t seem sincere in her attempt; there was no “you’re both really close,” but rather it was robotic as she said “We’re going to send the top two back.”
In other cases, however, you simply have to improve, or you’re probably saying, “We’re out of the running.”
If the listing agent came back again, and again, and again, and you continued to bid, and bid, and bid, and ended up far beyond any number you ever contemplated – then make no mistake, that is the very definition of a “bidding war.”
In some rare cases, as I’ll explain shortly, it’s not necessarily the listing agent’s intent to create a bidding war.
Earlier this week, something happened that I’ve never experienced before, and I’m out on offers 2-3 times per week, every week, all year.
My clients, Rina & Jon, were looking at a magnificent and exceptionally unique property, priced at $1,598,000.
There was a set offer date, and we surmised, based on other sales and other listings, that this property “could” sell for $1.9M in a hyper market. It was a century-old home, and the original features and character couldn’t be replicated by even the world’s greatest designer.
We came up with various scenarios about price, and having seen the house up the street sell for $136,000 over asking with seven offers, we assumed that this property would see significant action.
On offer day, we were pleasantly surprised to see only one competing offer, and we felt good about our chances.
Rina & John came up with “their number,” and I did my job, and told them that their number was low, and didn’t stand a chance. I said, “You have to be at least $1,700,000.”
They thought that was nuts.
There was only ONE other offer, and I was telling them to go $100,000 over asking?
Yes, yes I did.
Simply put: the other offer isn’t being submitted by a dummy. Nobody at this price point is going to mess around. These people have $800K down, they’re probably early-40’s professionals, and if they’re looking at living in this house for the next 30 years, they’re going to take this very seriously, and make a very strong offer.
Sure, at $599,000, you’re going to get some dummies who bid at list, or slightly above, when the house sells for $722,500, with the comparable sales showing $700K++.
But at this price point, I knew we would be neck-and-neck with the other offer. I just never knew how close until it was all said and done.
We bid $1,700,000, and for some reason, I felt confident. I felt like it was a very strong offer, and I was hoping that the other offer would be in the $1.6’s.
The listing agent called me a half hour later and said, “You’re both really close. In a virtual deadlock.”
Sure, sure. They all say that. Time would tell just how close we were…
I called Rina & Jon and told them that we were either ahead by $5-10K, or behind by $5-10K, but we had to add $25,000 to our offer, or we’d lose. I’d say about 90% of buyers improve their offers when given the chance – in the “first round,” so doing nothing would basically be giving in.
Rina and Jon agreed, and we improved our offer to $1,725,000.
I went and presented the offer again, and during the process, I got this “feeling” that we were low. In my conversations with the listing agent, I felt as though she was about to say, “Thanks, but we’re going to work with the other offer.”
So I pulled out my phone and said, “I need to call my clients – I need five minutes. I’m going to get a better offer.”
Call me pushy if you want to, but I knew we were low. And at this price point, with a life decision on the line, it’s my JOB to push.
I called Rina and Jon and told them to go up another $20,000, to make the offer $1,745,000, and they agreed.
If you’re wondering how all this went down, logistically – I always have my clients pre-initial pages with blank prices, so I can write the price onto the offer in a situation like this. I had four blank pages, and they certainly came in handy tonight.
I re-presented my offer, and I honestly thought I had it. The sellers were asking about the closing date, to which I basically said, “To get this deal, we can close at 3:12am on a boat in the middle of Lake Ontario. Just point, and shoot.”
I went back out to my car, and waited into what was now hour number-three.
I watched as the other buyer agent turned on her ignition, and drove away, and I thought we had it for sure!
The listing agent called me, and I was ready to pick up and hear those magic words that start with “Congratulations,” and then follow with other words that you tune out as you squeal like a child with delight.
But to my surprise, she said, “David, we’re going to ask you and the other buyer agent to come into the house. We have to tell you what’s going on, together, at the same time.”
I had never experienced anything like this before in my entire career.
And my mind began to race.
Suddenly, I thought, “Wait a minute…….maybe I got it by less than a thousand bucks, and since it’s a Bosley listing, the listing agents want to ensure the other buyer agent knows there’s no funny business, and no playing favourites, so they’re going to reveal this in front of both of us!”
I went in there thinking I’d won. The sellers were smiling at me – of course I’d won!
The other agent came into the living room, and that’s when the listing agent held up both copies of page-one of our offers, and showed we were BOTH at $1,745,000.
In fact, we had BOTH offered $1,700,000 to begin with.
We were tied. Again.
And had we not been tied, twice, this would have long since been over. Actually, had I not got that “feeling” that we were low in the second round, and told my clients to increase to $1,745,000, it would have been over before that too.
The listing agent, who was a total sweeteheart, said, “We’re not looking for more money. We don’t want to squeeze anybody, so at a complete deadlock, I dunno, do we flip a coin?”
The other buyer agent went right into survival mode, and said, “My buyer actually just gave me a new number as I was walking up the steps.”
Sure he did. He sent it to you in a “thought shape,” a la Chrysalids, by John Wyndham…
I rolled my eyes and said, “Yes, and my buyer also has a new number that they’d like me to present.”
I don’t blame the other buyer agent. Was she really going to leave it to a coin flip? She did what any good agent would do – both for herself, and her buyer, and she refused to leave it to chance. Had she not spoken up, I probably would have done the same thing.
I went outside to the car and called my clients, and Rina answered the phone by saying, “NO……MORE…..MONEY!”
I laughed. I had to. I’d already pushed them three times, and I hated to be in this position.
I told them what transpired, and I said, “It’s now a matter of whether we tap out.”
And they did. They tapped.
Sometimes when you’re being squeezed, you have no choice to tap the canvas and live to fight another day, or risk being choked out.
Part of the allure to this home was it’s “feeling” and how Rina and Jon connected with it, and they didn’t like how the bidding process had played out, and felt it would have left a bad taste in their mouths if they bought the house through a fourth round of bidding.
The other buyer agent came back at $1,757,000, and her clients bought the house.
You can call that a “bidding war,” and I might not disagree.
But the listing agents NEVER set out to handle it that way. I was told the day after, “Both your initial offers were $1,700,000, but had one been $5-10K higher or lower, we would have ended it right then and there.”
My clients were justifiably upset the next day, but I think it took guts for them to tap out when they did. They have no regrets, and with a self-imposed cap of $1,750,000 for the house from the very beginning, they had the discipline to stop themselves from going higher, which very few people could have done.
Situations like this aren’t common, but not every multiple offer situation is extended into a second round or beyond because of greed, or pre-planned strategy.
If you’re a prospective buyer, make sure you have a number in mind as to how far you’ll go, because there’s a very good chance that number will be tested!
And if your buyer agent tells you, “The listing agent said they’re will only be ONE round of bidding,” do not be surprised if there’s a second…Back To Top Back To Comments