December 2021 - Davies Condos

What should buyers know about bidding wars?

Competing offers — also referred to as bidding wars — are very common occurrences in hot real estate markets.

I know it can be very frustrating for buyers to bid and repeatedly lose out on properties that are getting five, 10, 20 or more offers.

Low housing supply, or inventory, is often a significant contributing factor and low supply is the current situation in many markets across Ontario. First-time buyers may find it especially hard to come out as the “winners” during these home competitions, and may need to expand the parameters of their searches. My advice is to take a long view, be patient and continue to save your money until the right property comes along.

In the meantime, here are a few things you should understand about how competing offers work.

For starters, it’s important to know that during any competing offer situation, a seller’s brokerage is obligated to disclose a few key pieces of information to prospective buyers who have made offers. These details are the number of active offers on a property, whether any of the buyers are represented by the listing brokerage, and whether there are any commission adjustments for specific buyers. These steps help ensure a level playing field for all buyers.

Note that the seller can accept or reject your offer, make a counter-offer, or even send back a select number of offers for an opportunity to be “improved.”

You might be surprised to learn that sellers are not required to choose the highest-priced offer. Other factors can influence their decision, such as the size of the deposit, the closing date and other terms and conditions of an offer. For example, the right closing date might be more important than the price.

Since each competing offer situation is unique, I suggest you get advice from your real estate agent, lawyer and mortgage broker before entering the market. Here are some tips to consider if a bidding war arises:

Set a clear budget. Know the numbers in advance to determine exactly how much you can afford. Factor in the extra costs that come with buying a home, such as legal fees, land transfer tax, and utility hook-ups. Manage your emotions when making your offer.
Ask your agent for a comparative market analysis of the sales of similar houses to know the value of homes in the neighbourhood and the possible selling price.
Think carefully before waiving any conditions to make your offer more appealing. These conditions are there to protect you, and an accepted unconditional offer is a firm and binding legal contract. You are bound to the agreement, even if after the deal is done you have trouble securing a mortgage or you find the home needs costly repairs.
Finally, ask your agent about the offer process and what you are entitled to know, and then work closely together to put your best offer forward.

This column is for general information purposes only and is not meant as legal or professional advice on real estate transactions.

Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.

Hamilton, ON (December 2, 2021) – The REALTORS® Association of Hamilton-Burlington (RAHB) reported 1,199 sales of residential properties located within the RAHB market area through the Multiple Listing Service® (MLS®) System in November 2021. Sales decreased by nearly ten per cent since last month, and they were down three per cent since November 2020. New listings also decreased by ten per cent since last month and they were also down three per cent since last November. The average price for residential properties was $911,673 which was a decrease of one per cent from last month compared to an increase of nearly 27 per cent from November 2020. The inventory available dropped even further to 0.5 months of inventory.

“Following a record average residential sale price in October, the average sale price held strong in November dipping by only one per cent,” says RAHB President Donna Bacher. “This month we experienced fewer properties changing hands and fewer new listings coming to the market overall, which is not unusual as we move closer to the end of the year. We have also never seen inventory this low as the level of active listings and months of inventory available continue to fall. We expect the same story in December which typically sees lower activity levels in general.”

The number of sales of detached properties in the RAHB market area decreased by 11 per cent in November 2021 compared to last month. The number of new listings decreased by 12 per cent, and the average sale price remained relatively unchanged at $1,023,561 following last month’s record. The number of active listings for detached homes has decreased by 19 per cent compared to October 2021.

“Single family detached properties continue to be one of the tightest segments of the market with active listings and months of inventory at the lowest levels on record. While the average single family sale price remained at over $1,000,000 across the RAHB market area in November 2021, the City of Hamilton’s average single family sale price was $911,896, whereas the City of Burlington’s average single family sale price came in at $1,535,491,” says Bacher.

The number of sales of townhomes in the RAHB market area decreased by 14 per cent in November 2021 compared to October 2021, and the number of new listings of townhomes decreased by 13 per cent. The average sale price increased by four per cent in November 2021 to $792,056, whereas the number of active listings for townhomes decreased by nearly 31 per cent compared to last month.

“The average sale price of townhomes spiked to a new record in November 2021 coming in just shy of $800,000. This property category saw only 53 active listings across the entire RAHB marketplace at the end of November with supply dropping to the lowest levels of 0.3 months of inventory,” said Bacher.

The number of sales of apartment-style properties in the RAHB market area remained unchanged in November 2021 compared to last month with 177 properties changing hands. The number of new listings decreased by two per cent compared to last month and the average sale price decreased by six per cent over last month to $564,827.

“Apartment-style properties continue to be an attractive investment with strong demand with the same number of sales occurring month over month,” says Bacher. “The average sale price for apartment-style properties attract both first-time buyers looking to get into the market and seniors looking to reduce their square footage and lower their maintenance costs overall.”

Specific neighbourhoods within the overall RAHB market see results that often differ from the average of the entire RAHB market area. Neighbourhoods vary and, determining the right price and conditions when buying or selling a property can be challenging. Local RAHB REALTORS® have the experience, knowledge and tools to help buyers and sellers make those big decisions.

Bacher adds, “Whether you’re the buyer or seller, RAHB has over 3,700 members to choose from to help you navigate the market. RAHB REALTORS® have access to the best training, systems and tools to help facilitate safe and successful showings and sales.”

**Average sale price can be useful in establishing long-term trends but should not be used as an indicator that specific properties have increased or decreased in value. Talk to your local REALTOR®.