01 Mar When bidding wars don’t work
Is a bidding war the best way to sell your house?
Creating a bidding war may be the best way to sell your home, but the process doesn’t always turn out the way you think it does.
Sometimes the bidding process fails and sometimes even when it fails, it works. What a home sells for in Toronto has a lot to do with a combination of pricing strategy and timing.
Generally, houses that do the best in bidding wars cater to families and are finished to a high standard. Not only because they show extremely well, but because growing families prefer a finished product and are under pressure to buy. Regardless, some quality homes still don’t receive any interest on the bid date. A few sellers are pricing their home in-line with what the house is worth and holding offers. They want multiple offers, but aren’t intentionally under-listing the home. This can be confusing to buyers who assume houses holding offers are always under-listed and the real price is much more. Sometimes these homes don’t receive any offers on the bid night, even though they are priced well. Later, when the home is still on the market for the same asking price, buyers often become interested and suddenly there are multiple offers. If a buyer had registered an offer on the bid date, they could have purchased the house without competing. Some sellers overprice their home and still hold offers. This is often done in a re-constructed home or flip where an investor is hoping to catch a buyer who over estimates the demand and value of the renovations.
The traditional scenario is a house is under-listed to attract multiple bidders, although this doesn’t always work.
The key term is bidder, not buyer. The bidders are the people who have little chance of buying the home, but want to participate in the process anyway. As a seller, you want as many bidders as possibly with a few moneyed buyers willing to go the extra mile. So the seller significantly under-lists the house at a price that attracts attention from people with lower budgets. This hopefully means a very busy open house, over-lapping showings and eventually multiple offers. The perception of a frenzy will drive a bidding war, just as staging a home will help reinforce the desirability of a home. If the house is not priced appropriately to attract enough bidders, the seller’s expectations may not be met and the house is re-listed for the price the seller really wants. The seller may not have unreasonable price expectations, they may have just overlooked certain attributes that buyers desire such as; brick frame, large bedrooms, storage, ease of access, finished basement, grass.
Some of the astronomical numbers that sellers receive for their homes can be attributed to good timing or even luck rather then any fundamental reason. If you are holding offers for the typical 7-10 day period, you are essentially hoping the right people view your house during this short time frame. Most of the time this works because there is little inventory and high demand. Although frequently homes are put on the market and sit, only to be re-listed a month or two later to sell for more then the previous asking price. In addition, there are bully offers on a house where a buyer ignores the bid date and submits a “can’t refuse” offer before other buyers have time to submit their own bid. The seller in this situation may be more lucky then anything else, as they have found a buyer frustrated enough to overpay.
These circumstances are the exception, not the rule, but there are homes that hold offers and don’t get sell right away.