The market is red hot again, and multiple offer situations are occurring with increasing frequency.

What is the best way to handle multiple offers?

Well, that depends if you are the buyer or the seller…

What is the hottest product in the Toronto real estate market right now?

I’d have to say houses in the downtown core in the $500,000 – $600,00 range.

I didn’t even need to set foot inside this gorgeous semi-detached Victorian last weekend before I knew it would get multiple offers and a huge pile of money over the asking price.  Sure, they might have been asking $595,000, but the sale price was closer to $700K.

So how are multiple offers handled?

Well, it all depends on the agent, in my opinion.

I happen to sit in the basement, er, “lower level” at Bosley Real Estate, and both conference rooms are on my floor.  Yesterday afternoon, a multiple offer situation was playing itself out in the large conference room, and the agents from various brokerages sat in chairs behind me, chatting away.

When the listing agent came out of the conference room, one of the agents asked, “Is this a one-shot-deal?  Or are you going to send us back?”

Right there, you have the two key phrases you need to know when dealing with multiple offers.

one-shot-deal

send-back

Allow me to explain.

Let’s say there are six offers on a property, priced at $569,000.  The listing agent might tell the cooperating agents, “This is a one shot deal.  Bring your best offer and we’ll see where we stand.”

As an agent representing your buyer, you can only assume that they are going to look over all six offers, and more likely than not, the highest offer will “win.”

It’s great when it happens that way….if you’re the buyer with the highest offer!  If you’re one of the other five, you are wishing you had another chance.

This brings us to the ever popular “send-back.”

The listing agent essentially asks one, two, or all six of the agents to go back to their clients for more money.

The listing agent will say, “We’re going to give you a chance to improve your offer.”

As a buyer, you are free to improve your offer, or not.

But what are the other five buyers doing?

This is when it becomes a guessing game.

The listing agent might choose to only send back two of the six offers, and tell the other four to go home.

Every scenario is different, and that’s what can be frustrating as a buyer.

The problem is this: if you knew your offer was the highest, you would want them to just choose the highest one and end it.  But if the listing agent comes out of that conference room and doesn’t tell you that you’ve “won,” then you definitely want the opportunity to go back to your clients to improve your offer!

It’s a double-edged sword.

You want them to take your offer if it’s the highest, but you want an opportunity to improve if it’s not.

The problem is: you never know where you stand.

And there is no standardized way of dealing with multiple offers.

It’s really a blind bidding process, and that’s why I’ve begun to wonder what things would be like if we held auctions.

Wouldn’t things be easier?

Think about this scenario: there are six offers, and the listing agent decides to “work with” two of them.  You’re offer is $655,000, and the other offer is $645,000.  You improve your offer to $678,000, and the other buyer improves his offer to $650,000.

You “win.”

But you would have had the highest offer even if you didn’t improve your offer!

You went up from $655,000 to $678,000, but the other buyer barely improved his at all.  You paid $23,000 more than you had to, simply because you didn’t know what the other offer was.

So what would happen in an auction situation?

Start the bidding at $1, or start it at $595,000.

Put those six buyers in a room, give them those awesome paddles that we see rare art collectors bidding with in the movies, and let them feel eachother out.

Maybe the house would sell for more than it would under traditional means, or maybe it wouldn’t.

Maybe two of the buyers would bid eachother up $1,000 at a time.

If you would pay $678,000, wouldn’t you pay $679,000?

And if you would pay $679,000, wouldn’t you pay $680,000?

Maybe this would be even more frustrating than the blind, multiple offer process that we know of today.

You know that saying, “What you don’t know won’t hurt you?”  Well when you have the second highest offer, and you’re told, “I’m sorry, but we’re going to accept another offer,” that hurts.

And if there was an open bidding process, you would know, and you could ensure it doesn’t hurt you.

You’d be free to bid as high and as much and for as long as you very well please.

But in the end, there are no auctions; at least not with real estate in Toronto in the mainstream.

I know that this is a very popular method in the United Kingdom, and I’ve watched a few auctions during shows on HGTV.

If you were to ask me right now, “Is this even possible in Toronto under Toronto Real Estate Board guidelines,” my answer would be: I don’t know.

But the possibility is incredibly intriguing.

And I think I’m going to investigate a little further…