— We take our content seriously. This article was written by a real person at BREL.
Multiple offers (often referred to as “bidding wars”) are common in the Toronto real estate market and can be a source of apprehension and doubt for many Buyers. We’ve compiled this how-to guide to take the mystery out of the bidding war process, as well as to arm you with knowledge that will increase your chances of coming through bidding wars with positive results.
What’s a Bidding War?
Real estate bidding wars don’t usually involve bids like an auction, and they aren’t actually wars. The term ‘bidding war’ is used to describe a situation where when more than one Buyer makes an offer on a property at the same time. Understanding the basics about multiple offer situations and having the knowledge to play the game will go a long way in making you feel more comfortable and help you get what you want.
Who’s in Control
Multiple offers generally present themselves in a Seller’s market, when Sellers are in control. In the words of my old economics Prof – a Seller’s market is when there are too many Buyers chasing too few properties.
When to Expect a Bidding War
In the Toronto real estate market, anything is possible. Some hot properties in hot neighbourhoods will generate multiple offers after being on the market only a day or two–and in some cases, in mere hours. Usually, when a Seller is trying to generate multiple offers, they will set a specific date to review offers (known as “withholding offers”) – usually 7 days from the date they listed their house on the market.
The Seller’s Goal
The Seller’s wants to expose their property to as many potential buyers as possible, then force anyone interested enough to make an offer to show up at the same time. If the strategy works, the result is multiple offers and often a selling price above what they might have otherwise received. It’s important to note that not all properties that have an offer date get multiple offers – but it’s best to be prepared just in case.
How It Works
Most bidding wars in Ontario are blind – meaning you’ll never know how much any other offer is. Your offer may be $1 below the highest offer, or $50,000 above the next-highest bid. In a blind bid, only the Sellers know what all the offers are – and only the winning sales price will be made public.
As of December 1, 2023, Ontario Sellers can now choose to reveal the contents of offers to the other bidders, provided that they give the same information to every person who has submitted a valid offer.
This rule change means we can now have open auctions for homes in Ontario and ushers in the possibility of greater transparency in traditional bidding wars.
As a Seller, you can direct your REALTOR to share the highest price, closing dates, deposit amounts and/or terms and conditions with the other offers. Names and other personally identifiable information must still remain confidential. You’ll be asked to provide that direction in writing – and can change or revoke your wishes at any time. The Seller is always in control of what – if any – information is released.
As a Buyer, it’s important to know that the details of your offer may be shared. That might work to your benefit if you aren’t the top offer – for example, knowing that the top offer is $25K more than yours can help you decide how to adjust your bid to win; but it also might work against you – for example, your offer is the highest and is used to get the other bidders to increase their offers. There are ways to structure your offer to keep it confidential – make sure to discuss the pros and cons of each strategy with your agent before you submit an offer.
In all bidding wars (blind and open), Buyers are entitled to know how many offers they are competing with. When a Buyer signs an offer, their REALTOR ‘registers’ the offer with the Listing Brokerage. The number of registered offers must be shared with other registered Buyers.
While in-person offers still occur, most real estate offers these days happen virtually, over email. There is usually a time set – for example, 7 PM on Monday, and offers are (usually) presented in the order in which they were registered.
Often, Sellers will select the best of all the first offers that have been presented to them. ‘Best offer’, of course, is a subjective decision based on the Seller’s specific situation, but it is usually a combination of the most attractive closing date, price and conditions. Sometimes, Sellers will send some or all of the bidders back to improve their price, so the process may take several hours. Never count on getting a second chance and you should strongly consider making your best offer – or close to it – first.
In some situations, though, negotiations are necessary. Sellers are only allowed to negotiate with one offer at a time – meaning they can’t sign back 2 or 3 offers at the same time, at higher prices, in the hopes that someone accepts it.
At some point, the Seller will accept an offer, and all other potential Buyers will be notified via their REALTORS. Click here for information on How to Win a Bidding War.
