Can A Bidding War Happen By “Chance”?

Stories! | February 13, 2015

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….”


“Bidding war.”

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…

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  1. Pingback: Can A Bidding War Happen By “Chance”? |
  2. Kyle

    at 9:32 am

    Come on David, that’s why you make your offer 1,701,000, unless the seller is Chinese then you offer 1,700,888.

  3. Chroscklh

    at 9:50 am

    I must say – I respect seller in situation above. They happy with price, why duck around with buyer hopes & 6 round bidding. “Hey folk, u tie, what want do, flip coin?” – this make Chroscklh feel warm. For me, I have tie with other buyer too – I did not know until after – Seller actually ask neighbour “Hey do you want to live next to late-30’s professional couple with 2 beautiful little girl…or eastern europe man who drive original H1 Hummer, with 2 rottweiler and who never take off black leather glove, even when inside?” Lucky for me, neighbour hate kid so now we one big happy community

  4. Joe Q.

    at 12:13 pm

    A question about the use of the verb “improve” as in “sending them back to improve their offer” — has it always been used in this context in the RE world, or was there a time when more neutral terminology was more common?

  5. Long Time Realtor

    at 12:24 pm

    This era will surely have to go down as the greatest sellers market of all time for low-rise homes. It used to be that working with a well-qualified serious buyer would ensure that a satisfactory real estate deal would take place in a timely fashion, with happy faces all-around. Not anymore.

    P.S. Bravo David! I hope your clients find their dream home soon.

  6. steve

    at 4:08 pm

    “This era will surely have to go down as the greatest sellers market of all time … ”

    You bet it will … just as you know it won’t last forever. If you’re thinking of selling,
    better list soon, and if you’re hoping to buy, be patient, there will be better bargains to come.
    Not here to be a RE bear, just want to suggest a little caution going forward (after all,
    out economy is in trouble … the oil patch has imploded, and so has out loonie).

  7. steve

    at 4:26 pm

    I never could understand why we don’t employ a auction process for buying/selling. For example, sellers would list a minimum price, and interested buyers could bid a price. Of course, this process would be transparent and nobody would need a poker face.

    1. Appraiser

      at 5:39 pm

      @ Steve:

      I could never understand how some people believe that the way to avoid a multiple offer scenario, is through an auction, which is by definition a multiple offer scenario.

      P.S. You heard it here first. ANYBODY that listens to Steve about waiting to buy a home in the GTA in the hopes of a real estate crash is an IDIOT.

      1. steve

        at 5:46 pm

        I am not a RE bear, just being a little cautious. Corrections do happen, and we’ve not had one for a long time.

        Auctions like the ones used is selling art would invite multiple offers and would be good for sellers.

        1. Appraiser

          at 7:02 pm

          “We predict that nominal house prices are likely to decline by a cumulative 25% over the next few years, in the same ball-park as the recorded declines in the US and other countries.”

          David Madani, Capital Economics, Feb. 03, 2011.


          “…prices will have to drop 45% for Capital Economics to be right once you factor in the 20% in price gains that have materialized since the 2011 call.”

          Phil Soper, CEO Royal LePage, Feb 05, 2015.


        2. 1 of 3

          at 12:21 pm

          There will be a correction in condo pricing once over saturation sets in and they begin to age. single family homes or land itself will continue to rise and toronto will resemble New York and Chicago just looking at population growth and our geographic situation. So steve isn’t completely wrong. The appraiser may need to go back to school to reappraise his qualifications.

      2. jeff316

        at 7:50 am

        You’re a jerk, but this was a great line:

        “I could never understand how some people believe that the way to avoid a multiple offer scenario, is through an auction, which is by definition a multiple offer scenario.”

    2. Kyle

      at 11:37 am

      @ steve

      Have you ever sold your home through an auction house before (assuming you ever owned one)? Because the option of doing that is available right now. If you haven’t then please make sure you go that route if you ever do sell your house, and be sure to let us know how it worked out for you.

  8. alana

    at 5:59 pm

    Chrysalids, I loved that book. At 31 yrs old, I feel like a deviant living the fringes aka my shared three bedroom apartment…

  9. Donny

    at 6:49 am

    I say get all the buyers at the table together at the same time and let the games begin.

  10. MaxRockatansky

    at 10:39 am

    Whenever we get down to the 1-2, we just go to Thunderdome. So you are telling us that agents don’t nudge nudge wink wink at each other and just go to the max redline number at the end? So, how much was the commission on this purchase? Do you think the other agent probably just said “I’ll knock down my fee .5% to get you onside!” Getting 2% of 1.75mil sounds a lot better than 2.5% of zero. Enquiring minds want to know.

  11. Jonathan

    at 10:13 am

    It would be so much easier if selling agents were more transparent about the bidding process, or perhaps used an eBay style bidding process (everyone bids their maximum, but selling price is $1 above the second highest bid). In this case your clients were not willing to pay a single cent more than their final bid, while obviously the other buyers were willing to do the same. If everyone knew this at the outset you could have saved a lot of time and energy, with the same result.

    Incidentally, we ended up buying our house through similar circumstances. Offer day came and went with no bids, then a couple days later we and another couple ended up submitting bids on the same night. Luckily for us they were from out of town and didn’t seem to understand that the house was priced low, so we ended up winning the “war” at 101% of asking price. If we had been more on the ball we might have got it for asking price or less, or maybe the seller would have tried to re-list. That’s just the randomness of the real estate market, I suppose.

    1. Kyle

      at 11:04 am

      It wouldn’t have been the same result. In the story the seller got 1.757M, and David’s clients bowed out at 1.745M. If it were open and transparent the seller would have gotten $12K less. Try putting yourself in the seller’s shoes, given that you the seller are paying all the commission, why would you want a process that results in receiving $12K less for your house?

      1. Jonathan

        at 12:23 pm

        Good point… as long as buyers are willing to bid blind, things will never change.

  12. Lisa Keenan

    at 12:35 pm

    Anybody who lets themselves get pulled into a bidding war is a fool and so is their agent. Make your first offer your best and pull out if it’s not good enough. Fuck greedy agents.

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