Susanne Hud­son – Huff­in­g­ton Post Canada

Hold­back Offers are a mar­ket­ing tool whereby the prop­erty is listed for five per cent under mar­ket value and offers are held back for a week. They are taken on a cer­tain date in antic­i­pa­tion of mul­ti­ple offers with the prop­erty sell­ing for 10 per cent or more over the ask­ing price.

When you list your home for sale, your real estate agent will talk about how to best mar­ket your prop­erty. You may decide to list your home at a price com­fort­able for you and based on com­pa­ra­ble sales in your neigh­bour­hood. Your home is basi­cally then ready to receive offers any­time. Or, you may decide to mar­ket your home using a hold­back offer scenario.

This is strictly a mar­ket­ing tool but it is most com­monly used in a seller’s mar­ket (very few homes for sale), in a very active mar­ket or sought-after neigh­bour­hood, or, with a house that is pretty per­fect and will be very attrac­tive to buy­ers at that price point. It may also be a house that is attrac­tive to devel­op­ers or an older bun­ga­low on a wide lot — or even bet­ter, a dou­ble lot — that can be torn down and a new house or houses built for three times the price of the lot/bungalow.

List­ings with hold­back offer clauses pre­dictably come out early in the week with an open house for agents mid-week and a pub­lic open house on both days on the week­end. Some­times a home inspec­tion is done and pro­vided for buy­ers ahead of the offer date. The offer date may be on the Sun­day night or one night the begin­ning of the fol­low­ing week.

Pric­ing the prop­erty takes into account that you expect mul­ti­ple offers. The home is listed at prob­a­bly five per cent under its mar­ket value in hopes of get­ting 10 to 15 per cent over ask­ing. This is not with­out risk since if there are not mul­ti­ple offers, you may get one offer at your list­ing price (five per cent under ask­ing) the night of the offers.

The night of the offers, most buy­ers have been pre-approved for their financing/mortgage and they have had a home inspec­tion of the prop­erty ahead of the offer date (or a cur­rent one is made avail­able by the seller). There­fore, In Toronto — cer­tainly in the cen­tral core — most offers come in with­out a financ­ing or home inspec­tion clause. The num­ber of offers and the final sale price depends on the num­ber of offers and how attrac­tive the house is to buyers.

Most buy­ers don’t mind pay­ing a bit over the mar­ket value if the house and/or area are out­stand­ing and ratio­nal­ize that the house will prob­a­bly increase in value by that much over the next year or so. The caveat here is that the house has to appraise at the buyer’s accepted offer price and if it doesn’t, the buyer has to come up with the dif­fer­ence. In my expe­ri­ence, this doesn’t hap­pen very often.

Ben­e­fits of hold­back offers to the seller: not just an increase in price but also an effi­ciency of time. Less time on the mar­ket if it works and less stress for the seller!

In the first three months of 2012 the per­cent­age of hold­back offers have var­ied and so have the results — from two per cent over ask­ing in slower areas to up to 18 per cent in more sought– after areas. In the down­town condo mar­ket, most of the con­dos do not have hold­back offers and sell close to ask­ing price. Lofts do some­what bet­ter and have per­haps 20 per cent with hold­back offers/over ask­ing price.

So in sum, hold­back offers are a mar­ket­ing tool and are most com­monly used in a seller’s mar­ket or an active mar­ket. In a buyer’s mar­ket (lots of houses for sale, few buy­ers) there will be few hold­back offers. Hold­back offers have been in place for over six years. There you have it!

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.
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stan­dard clause for hold­back ontario real estate

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