Multiple Offers - Carbon Real Estate Group
Carbon Real Estate Group

How to Deal With Multiple Offers When Buying Real Estate


By now you surely have heard about “bidding wars” in the media whenever the Toronto real estate market is mentioned. It’s a term coined by the media that really makes us cringe, especially when the media will have you believe that all Realtors “just love” bidding wars. If you are representing the seller, sure that may be true as the results are in favour of the seller in today’s market.

However, when working as the buyer’s representative, this occurrence is the most frustrating part of our job as Realtors. What Realtor wants their buyer clients to experience putting in offer after offer, looking at more and more houses for months on end? So, the media is only half right about Realtors’ take on bidding wars.

Keep in mind that this situation is not always intended. There are situations when 2 or more buyers just happen to like the same property at the same time, despite how long the listing has been sitting on the market. I have run into this for listings that have been on the market for well over a month. You negotiate a fair price and terms, the offer is just a signature away from being signed-off… and then you get the worst call you possibly could get during this process: another party is interested in the same home and the seller wants to wait for the new offer to come in.

When encountering multiple offer situations, here are our suggestions on making your offer as attractive as possible to the seller:

  1. Price– More often than not, the seller will just simply accept the best offer. The idea of submitting less than your best price to leave yourself with negotiation room isn't always the best strategy, or even an option. Other times, you may actually have the best price and the seller uses the other offers as leverage to get you to pay a higher price. In some instances, you may have the highest price, but the offer will be turned down because of the factors shown below.

  2. Conditions– Less is better and submitting a "firm" offer means no conditions at all. A firm deal poses nearly no risk to the seller of the deal falling through, unless deposit funds aren't provided due to buyer's remorse (see #3).

    From the buyer’s perspective, a firm offer provides no way out of a deal. There is a risk taken by the buyer, especially if there was a problem with the property and a home inspection or condominium document review was not undertaken.

    If there is a specific offer date, then you can (and should) perform a home inspection or review condo documents in advance of making your decision to submit a firm offer. For houses, a pre-offer home inspection is advisable in multiple offer situations and can be booked usually with 24-72 hours notice. Sometimes there will be a pre-listing home inspection offered to buyers to save them time and costs, which can entice more people to bring forth an offer. For condominiums, you should retain a lawyer in advance of your home search in the event you need legal advice or a review of condominium documents.

    Keep in mind that it is your decision to waive conditions to make your offer more attractive to the seller. As long as you are aware of the potential risks and have confidence in your ability to secure your financing, you can choose to waive all of your conditions.

  3. Deposit– More money is always desirable and a bank draft in hand is even that much better, as it shows you are definitely a serious buyer. A deposit in hand combined with no conditions is viewed as the safest offer in the eyes of the seller (i.e. minimal risk of the deal falling through, and if it did on the closing date, it would be your deposit money on the line).

  4. Closing Date– Often the least important factor to most sellers, as they would rather take more money than get their ideal closing date. Closing date affects price very little, but it will give you the edge when all other things are equal and the seller wants a specific closing date.

    The ideal situation here would occur where the seller had bought a home already and couldn't afford to have 2 closing dates very far apart. In a multiple offer situation, you can be sure that at least one party will give the ideal closing date to the seller to sweeten their offer. When discussing the closing date, consider the costs to yourself, as well as the potential savings or benefits to the seller.


SO… HOW MUCH OVER ASKING?


This is the hardest and most important part when dealing with multiple offers: how much should you offer? Even though comparables may tell you what the property SHOULD sell for, you have to take into account that not all Realtors perform their research the same way or advise the same pricing strategy. Sometimes there is a buyer who chooses to barrel in with guns blazing, because they just get that home after a long, exhaustive search or it fits everything they want in their dream home. Likely, these buyers have been through the losing end of this process before!

I have noticed these sold price trends with multiple offers (not a golden rule, but this is what I found to be often the case), based on the list price beingfair market value:

  • 2 offers – usually sells between the asking price to as high as 5% over asking. Sometimes a property does require going significantly higher than 5% of asking price when the asking price is intentionally set much lower than market value.

  • 3-4 offers – usually 2-10% over asking with 1 offer tending to be too low to be competitive. If there are offers of similar value, then a second round is often allowed for buyers to improve their price and terms. Otherwise, the best offermaybe accepted at the first attempt.

  • Over 4 offers – I assume that 1 or 2 offers will be much lower than all others and 1 or 2 will be substantially higher. Be prepared for a chance to change your price and terms, since these situations usually get into a second round unless one offer is substantially better than the rest and the seller doesn't want to take a risk of losing that offer.
  • Over 7 offers – This just gets downright crazy and it is often the highest/best terms overall (i.e. highest price, no conditions, a deposit in hand, and ideal closing date for the seller) that gets the property during the first round. This is also where I see people seriously overpay for a property due to the confidence in future market growth to recoup the extra money paid to secure that property.

    In this situation, nobody can guess at where the price will end up, so the best you can do is offer the most that you feel the home is worth to you, based on others you have seen and your personal motivation for buying that particular home. Just be sure not to get in over your head!


This primer should help you get a better feel on what to do should we encounter competition for a listing in the future. Hopefully, it isn’t a regular occurrence during your search, but in these good times, it will be highly likely to happen at least once. Good luck!