— We take our content seriously. This article was written by a real person at BREL.
In Part 2 of What to Expect on Offer Night (for Sellers), we’re going to be looking at bidding wars.
In a hot real estate market, bidding wars are common. They usually arise in 2 different ways:
- The manufactured or intentional bidding war, when you set a price to attract attention (usually artificially low) and withhold looking at offers for a period (usually 6 or 7 days; for example, you might list a home on September 7th and decide to look at offers on September 15th at 7 pm). Withholding offers is a good strategy to ensure potential Buyers have an opportunity to see the home.
- The natural bidding war, when more than one Buyer makes an offer at the same time. The Toronto market is smart, and when good properties are in short supply, and the Buyers are plentiful, it’s not uncommon for natural bidding wars to occur (we see this daily in the condo market right now).
Offer Registration
When an offer is signed by a Buyer, their agent should officially ‘register’ it with your agent’s office. Details of the offer won’t be revealed – simply the existence of an offer. Once the first offer is registered, your agent will likely contact anyone who has shown the property to inform them of the offer and when it will be presented. As new offers are signed, they will also be registered with your agent’s brokerage.
Offer Night
In an ideal world, multiple Buyers make offers at the same time and those offers:
- Won’t have conditions
- Will be significantly above asking
- Will meet your closing date
- Will be accompanied by a sizeable deposit (at least 5% of the purchase price) via certified deposit cheque or money order
- Will be accompanied by a certified deposit cheque
The offers will be presented to you, one a time, and you can choose to:
- Accept the highest and best offer. Congrats! You’ve sold your home.
- Ask everyone to improve their offers
- Ask the top few offers to improve their offers.
- Choose to negotiate with one of the Buyers.
While Ontario home buyers have always had a right to know if there are other offers on a property (and the number of offers), the contents of the offers – price, closing date, terms and conditions, etc. – had to remain confidential. This is often referred to as ‘blind bidding’.
As of December 1, 2023, blind bidding is still permissible; but a Seller can now choose to disclose the contents of the offers to the other bidders, provided that they give the same information to every person who has submitted a valid offer.
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.
Despite the new rules, some Buyers may choose to keep their offers confidential and not allow the contents to be shared (essentially revoking their offer in the event that the Seller wants to share it). Make sure to discuss strategies to deal with this situation before offer night.
Note: when you ask a Buyer to improve their offer, you are essentially rejecting their offer, so they may choose to walk away. And yes, it’s entirely possible that you ask everyone to improve their offers (thereby declining them all) and everyone decides to go home, so play this game carefully.
Of course, bidding wars don’t always go as planned. One of 3 things can happen:
- Multiple offers are registered and submitted (yay, bidding war!)
- One offer is submitted (in which case you can choose to accept, negotiate or walk away – it’ll almost always be at or below the asking price)
- No offers are submitted (in which case, you can choose to stay on the market at the current price or revise your price (up or down) to reflect what you really want.) If you don’t get the offer you want on Offer Night, it’s important to have an honest conversation about what happened. Are your expectations in line with the current market? How many showings have you had? Did your competition sell? Did anything extraordinary happen? (e.g. a weather event or the Blue Jays playing Game 7 in the World Series).
My most important advice to you: listen to the market and don’t make rash decisions no matter how emotional you’re feeling. A top agent can go a long way in educating and counselling you on bidding war night. Choose your agent wisely.
Stay tuned for Part 3 of the series: the Bully Offer. If you missed Part 1, click here to read about the “Normal” Offer Negotiation.
