After seeing the article in the Star about the woman how had to complain to RECO after losing her first and only bidding war, I am a little peeved.
Trust me, I know how you all feel. I bought my own house in a bidding war, I paid over asking for it. I had no finance or inspection conditions. And I did not like it.
But to write to RECO to complain is a bit much. I am tired of all of these complaining stories in the papers. From the FML blog to this, all everyone wants is a sob story. Real estate agents are demons, sellers are horrible, prices are too high, everyone is out to get everyone and it is all one big conspiracy that is going to crash tomorrow. Or the next day.
Nothing could be further from the truth. Real estate agents are not conspiring to drive up prices – there are approximately 100,000 sales in the GTA every year. So there are 100,000 buyers and 100,000 sellers – at a minimum. Add to that 200,000 realtors and you have at least 400,000 different people setting the tone of the real estate market every year. They are not all in it to screw you out of your dream house. Some, maybe… but not all of them. Kidding!
It is not interest rates, as they have been low for some time now. And they were higher years back when all of this craziness started. Rates were close to 6% in 2006 when bidding wars really took off. They were not much lower in 2007 when all sorts of records were broken. They were over 5% in 2008–2009 when the market dropped slightly and then rocketed back to life. They were higher in 2010 and last year. So, it is not interest rates. I bet we see rates rise to around 4% for 5-years – which is pretty much a 25% increase – by the end of the year. And it will make not a difference.
The problem is supply and demand. Right now, demand WAY outstrips supply. There are 10 buyers for every seller. I do not know why people are not selling, but it is just the way it is. Go back through my posts over the years and you can see that I have been saying this for a long time. And the problem is, every house that sells leaves 9 bidders that did not get it. So the next one has 11 bidders – and 10 who did not get the house. Then 11 do not get it, then 12… and so on… The problem is that we keep adding 2 buyers for every seller. So every day supply goes down while demand goes up. Until listings go up 10-fold, this is going to be the problem.
It is just sore losing to start name calling and complaining if you do not win a bidding war. Yes, some houses are under-priced, but a good real estate agent can see that a mile away. I know I can – and I advise my clients appropriately. They send me links from Realtor.ca saying how good a deal a house is, why is it so low? I explain they are looking for bids. Some do not mind, their budget is higher and they are prepared to get into the fray. Others do not want to, so we avoid those homes.
That is where you need a trusted realtor to help you. Their advice is priceless in these situations. I have been in 100 bidding wars – or more – and I have a pretty good idea of how they will play out. Listen to me, work with me, we can get the house. If you do not want to play that game, stay away from houses with bids.
Part of the problem with houses getting 14 bids is that 10 of them have no intention of bidding to win. If a house is priced at $500,000 but market value is around $600,000 and there are 14 bids, then offering $550,000 with tons of conditions will not get the house. Of those 14 bids, some will be under asking (because they do not want to believe that the house will sell for over asking), a few more will be right at asking, others will be a bit over asking – and then there are 3–5 that are serious and are way over. The problem is, take out the 10 bids that are not serious and the house sells for $540,000 and not $620,000.
Bids are blind, no one knows what anyone else is bidding. Thus, all we have to go on is the number of bids. Generally, when there are 8+ bids on a house priced over $500,000, you can expect to see around $10,000 over asking per bid. So the 10 bids that are not serious just add $100,000 to the asking price. And now, the next house is listed at $520,000 and sells for $640,000. And so on. Putting in low bids “just to see what happens” always backfires. It pushes up the price of the house, and thus the price of the local area.
And you cannot fault the seller, can you? Do you spend time complaining about sellers on eBay who hold out for the highest price to sell to? Or Kijiji, where most ads specifically ask people NOT to low-ball them. If you own something, it is yours. You can sell it for however much you want, to whoever you want. Yes, all the power is in the hands of the sellers right now, it sucks if you are buying. But complaining is just juvenile. Learn from your mistakes, know more the next time. Go into battle ready to win and do your best. If you do not win the first time, get back on your horse and go again.
There are few things in life we can control, do what you can with what you have. And be as grateful a winner as you are a gracious loser. One day you will be in the other seat, selling your home. I hope that people bidding on your house are as nice to you in return.
But for now, until we get more listings, supply will be tight and sellers will be in control. Take a breath and be strategic, we will get through this! Together!
All the best and good luck with your home buying or selling.
Contact Laurin Jeffrey for more information – 416−388−1960
Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.
Incoming search terms
- House sellers, buyers balk at bidding wars In a market where listings are down significantly compared with…
- Bidding wars make a comeback House sales for the first two weeks in May were…
- Young couple squeezed in ‘crazy bidding wars’ Buyers now find themselves house-hunting during the most volatile market…
- Five things we learned about Toronto’s real estate bidding wars from the Globe and Mail A recent Globe and Mail feature delved into Toronto’s bidding…
- Stop Toronto’s bidding wars Want to stop bidding wars in this city? Don’t get…