Should You Go Into Multiple Offers For “Just” A Condo?

Condos | April 20, 2015

We all know how red-hot the housing market in Toronto is, and how virtually every home in the city under $1 Million ends up in multiple offers.

But when it comes to condominiums in the downtown core, there’s a common viewpoint among buyers that a condo doesn’t necessitate multiple offers the way a house does, or rather, a buyer doesn’t “need” to enter into a competitive bidding situation for “just” a condo.

Well if the spring market so far is any indication, multiple offers on condos are very common place.

So if you’re a buyer, and you’re saying “I won’t go into multiple offers for a condo,” then you’re going to eliminate a LOT of options right off the hop…

MultipleOffers

Toronto’s real estate market is tough, there’s no doubt about it.

And it’s not unusual to see a would-be buyer come into the process with his or her back up.

I remember back in about 2008 or 2009, one particular buyer who stood out to me as too frustrated to ever be successful in the market.

I met her at a house in Cabbagetown – our very first meeting in person, and we walked through the house, commented on our likes and dislikes, and did a pretty thorough job investigating all the house had to offer.

It was very casual, and I didn’t expect she was going to jump at this, but I did need to tell her at the end of our tour, “By the way, the seller is reviewing offers on Tuesday night.”

Her demeanor immediately changed, and she said, “Well goodie for them.”

I paused, not really sure what to make of her comment, but before I could muster up a response, she said, “I’m not going to let somebody tell me when I can make an offer.  I’ll do so according to my schedule, and on my terms.”

I replied with a somewhat diplomatic response, trying to placate her, offering, “Well, I agree, we’re all busy these days!  And perhaps we can work within your schedule as well as what the listing agent has laid out for offers.”

And that’s when she hit me with what I should have known she was going to say all along, “Oh, sorry if you don’t understand: I won’t do a bidding war.

Hmm.  “I won’t do a bidding war.”

Does that even make sense, grammatically?

You might “enter into” a bidding war.

And it’s semantics anyways.  You say “bidding war,” and I say “multiple offers.”  I feel like I’ve written that a hundred times.

I told her, “I don’t think there’s going to be a bidding war on this house – I mean, like fifteen offers, and people making insane decisions based on emotions, maybe several rounds of bidding.  But I think there’s going to be multiple offers, even if it’s just two or three.”

She replied, “But I won’t do a bidding war.  I won’t do it.”

Basically what she was saying was that she would not “bid” on a house, according to a pre-determined schedule, laid out by the listing agent and the seller.

She would not partake in “offer night” with the rest of the city, nor would she have her offer “graciously reviewed at 7:00pm” by the listing agent, as was the custom at the time, and still is.

I tried my best to work with her for a couple weeks, but every property I sent her had an “offer date,” and each time she would say, “I’ll take a look after it doesn’t sell,” almost willing and wishing her way to a good price.  But alas, you can wish all you want in this market, but it has no effect.

Every house I sent her ended up selling for over-asking, in multiple offers, on offer night.  And when she said, “It’s your job to find me a house that doesn’t have a bidding war,” I realized that it wasn’t just her use of the phrase that was incorrect; it was her outlook on the market.

She was never going to be successful in this market; not with that attitude.

She came into the process with a tremendous amount of resentment, and she was bitter, stubborn, and frustrated beyond belief.  While I sympathized, and I still sympathize with today’s buyers, anger doesn’t get you anywhere.

Coming into the buying process with a set of pre-determined rules can often cut you off at the knees before you start.

Case in point: those condo buyers in today’s market, who simply say, “I won’t be in multiple offers on a condo.”

Now I can easily count myself among those who have used that phrase in the past.  There have been times, and will me more times, when I felt, “This market doesn’t necessitate a “hold-back” on offers for condos.”

There have also been times when I’ve said, “I don’t know if we’re in the market climate to be competing for condominium listings.”

But that’s the most interesting part about a free market: situations change.

Prices can go up or down, as we know, and the climate of the market can change too.  What’s reasonable, or what is customary, can change in mere weeks.

Last fall, it wasn’t uncommon to see condos sit on the market just a wee bit longer than we were accustomed to, and we were seeing sales in the 96-98% of list range.

If you’re reading this and you’re not from Toronto, you’re probably wondering why I’m AGHAST at the idea of a condo selling for 96% of asking.  But consider a $379,900 listing that sits on the market for 30 days, and eventually sells for $365,000.  We might have seen that last fall, but we’re far, far from seeing that today.

We’re just shy of four months into 2015, and I have lost in multiple offers on condos seven times.  Not only that, four of those instances were in April.

So the market climate for downtown condominiums has changed, and with it, has to come the change in the mindset of today’s condo buyer.

To simply say, “I won’t compete for a condo” is far too stubborn, and while I might be inclined to agree, say, 70% of the time, certain situations demand it.

Two weeks ago, I saw a condo for sale at 21 Nelson Street, listed at $399,900.  I went to view it with my client on the first day it was listed – around 6pm, and we proceeded with an offer of $395,000.  When I called the listing agent to register our offer, he told me there were already two offers ahead of us.

It was nuts.

This condo was magnificent, don’t get me wrong.  But if you go back three weeks, it was probably tenanted, with two students living in their own filth.  I don’t want to turn this into an advertisement for “why to hire a full service Realtor,” but the unit sparkled by the time it was on the market.  It was cleaned, painted, fully staged, and all the light fixtures had been upgraded.  It was incredibly bright, and the staging wasn’t half-assed – they even had those throw pillows of Marilyn Monroe & Audrey Hepburn.

So what was it “worth?”

Well, by the time a fourth offer came in, I told my clients that the sale price was going well over asking, and having already raised our bid to the listing price of $399,900, and being told we weren’t close, I advised my clients to walk.

And walk, we did.

That was a case where I felt paying $20K over asking for the unit (or maybe more?) wasn’t a good play.  We would be paying for the staging and marketing, and while the square footage, layout, finishes, and view were all fantastic, I have to think the four offers and the above-asking sale price were purely a function of marketing.

Last week, I saw a very small unit at 138 Princess Street, listed at $309,900, and it ended up getting three offers as well.

My client was an investor, and the numbers all worked, as did the overall picture.

The unit could probably rent for $1,550 per month, and the fees in that building are really low – about $230, plus utilities, which we’d ask the tenant to pay for.

The unit was a soft-loft style, with 9-foot ceilings, and decently upgraded.

For $309,900, in prime St. Lawrence Market, I wouldn’t expect to find something like this – even with a “true” bedroom; no bachelor, no junior-one-bed, and I absolutely loved the price.

Alas, with three offers, the price was too good to be true.

But here’s a case where I did feel that going into competition for a condo was worthwhile, and I would have advised my client to pay up to $320,000 for the unit…….had it not sold before we could proceed!

Was the unit under-priced?  Or did I just have a different valuation for it?

The way I saw it, this 138-unit building, with low maintenance fees (no concierge, no amenities, little overhead), which is located right across from No Frills, and steps to the TTC streetcar, offered something very special in the form of this entry-level, 550’sih square foot unit.  It was perfect for an investor looking for yield, as well as an above-average long-term appreciation, which I guarantee this unit has.

A+ location, A+ unit, and A+ financials.

So if you have to “bid” on the unit to be successful, then have at it.

Here we have two examples – one condo with four offers, that I don’t really see the value in “bidding” on, and the other condo with three offers for which I would jump at the chance to bid over-asking.

As you might assume, whether or not to get involved in multiple offers on a condo all depends on the condo, and of course, the buyer.

It might depend on whether you’re an investor or a user, or whether you’re young or old, male or female.

What makes sense for one buyer might not make sense for another.

But I’m quite surprised at how hot the spring 2015 Toronto condo market is, and if you’re a buyer in this market, you simply can’t say, “I won’t be in multiple offers for a condo.”

If multiple offers result on the unit you happen to be looking at, then take solace in the fact that you have excellent taste, and the market agrees with your choice.

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9 Comments

  1. Marina

    at 9:31 am

    The notion of condos not having multipes is predicated on two factors:

    1) Condos should be easy to price correctly since there are so many direct comparables
    2) Where houses tend to be unique, most condos are pretty standard, so if you cannot buy one, you can find something very similar, if not identical.

    So if a condo is either under-priced, or had very unique features, then multiples make perfect sense.
    Combine underpricing with great marketing, and off you go.

  2. Chroscklh

    at 11:19 am

    Back my country – we have multiple bid on most all deal, condo or house. Is because most deal celebrate with much vodka, next day no remember if made offer or what price so must make offer again. This can continue for 4-5 day. But culture is change now – vodka-fueled oral negotiate is way of past. Now, is still vodka-fuel but we write down number and sign paper.

  3. AndrewB

    at 8:10 pm

    I don’t see anything wrong with multiples on a condo. There are many great buildings and unique condos across the city. Since SFH and non condo options are too expensive, condos will see a rise too as the alternative to living in the city and people will pay for it.

    I’m interested to hear how things ended with your female client. Did she ever buy anything?

    1. David Fleming

      at 10:59 am

      @ AndrewB

      No, we lost touch.

      I stopped sending her listings, and she stopped emailing me.

      I didn’t want to say, “You’re insane and you’re never going to buy in this market,” and she didn’t want to try and convince me otherwise…

  4. natrx

    at 10:53 pm

    It’s a zoo out there. When you have low income people going all in on a house, leveraging up to the max, it’s a scary time.

  5. Clifford

    at 11:18 pm

    138 Princess (the condo you were speaking of) is a great building. I was looking at a 2 bed/2bath unit there. It was tenanted previously and sat on the market. kicked the tenant out (or the lease ran out), they put it back up on the market and it had 3 offers on it day one. It went over asking and I do kinda regret not putting an offer on it.

  6. Amelia

    at 8:46 am

    I like to invite my buyer clients to put their (future) seller-hat on.

    “Let me understand this. When you’re in the driver’s seat and you list your property for sale down the line, you’re going to sell it to first person who makes an offer, no matter how many other interested parties there are, just to be fair right? Wait. How is that fair to the other prospective buyers?

    In any case …

    Help me understand, if you had more than one offer you would refuse to look at other offers essentially selling your biggest asset on a first-come-first-served basis, no matter what the market conditions are, potentially capping your profit?? Do I have that right?

    Oh – you wouldn’t do that? Ah ok. I see. If you wouldn’t do it, you can bet your boots the majority of sellers out there now wouldn’t do it either! Would you like to hear my thoughts about how to win in a multiple offer situation instead of how to avoid one? Avoiding them just means walking away from amazing properties that you could otherwise have a shot of owning.

    Once FTB taste their future greed, their fear of being in multiples seems to diminish. If you want to own the property that’s going to get multiples when you sell, chances are you’re going to have to be in multiples to get it, even if it’s a total gut.

  7. Joe Q.

    at 9:50 am

    Does “multiple-offer situation” always equal “bidding war”? In the current system (or lack thereof), one can make a distinction between a case where the seller solicits offers and then picks the most attractive one, and a case where the seller sends potential buyers back for endless rounds of “improvement”. The latter is what I’d call a “bidding war”.

  8. KC

    at 12:29 pm

    Hi David,

    A relative of mine recently bought a unit at King & Spadina for $622 per sqft. Is that a steal? Are multiple offers still happening at this time or has it gone down? I’m curious if now is the time to buy a condo. Thanks in advance for your advise.

    KC

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