To ignite a firestorm of offers on your home, follow this five-step plan.
“Offers kindly reviewed on July 22 at 7 p.m.” If you’re buying a home in Toronto, chances are you’ve read a line like that before.
That is what’s called a “hold-back” on offers: when a seller will only review offers on a specific date at a certain time (usually in the evening), thereby increasing the chance of receiving multiple offers on the property. This, by and large, is how a bidding war breaks out.
The Toronto market is hot—it has been for some time—and multiple offers, over-asking-price sales and even bidding wars are nothing new. But lately, I’ve been seeing a lot of offer dates set for houses that have no business doing so. The seller’s assumption of receiving multiple offers is borne partly out of naïveté and partly out of greed.
Despite what many sellers think, setting an offer date does not automatically result in a bidding war. A house or condo does not simply sell itself and it certainly doesn’t sell itself for top dollar, even in a market like this one. In order to drum up several interested buyers, a hold-back on offers should only be one part of a larger selling strategy.
The first thing you should know is that properties that receive multiple offers are usually under-priced. If you believe your house is worth $550,000, perhaps a modest $499,000 list price might bring more buyers to the table, and help push the price over fair market value.
Second, only the best properties get multiple offers. The property must be in a high-demand area or building, represent a rare opportunity to own, be in an appealing price range or show, as they say in MLS listings, “A++.”
Third, a property must be staged in order to show its absolute best. Granted, an estate-sale house that is barely four walls and a roof could receive multiple offers as well, but these have usually been laughably underpriced. This was the case with a recent sale in Riverdale, when a house fetched $317,000 over asking.
Fourth, an offer night should be scheduled for six to eight days after the property has been listed—no more, no less. A mere two or three days isn’t enough time to properly expose the property to the market and usher active buyers through. Any more than eight days’ time allows buyers to cool off and encourages them to look elsewhere in the interim.
And finally, properties must be marketed and advertised effectively. A For Sale sign on the lawn is no longer enough. There are many houses and condos that come onto the market with an offer date, even though they’re overpriced, don’t show well and the listing provides little (if any) information about the property. How can a seller expect to entice multiple buyers to the table when there are no photos of the actual property on MLS?
I’ve seen a few properties in northeast Toronto listed in the $1.8-million range with a hold-back on offers, none of which garnered multiple bidders. Last week, a house came onto the market for $2.5 million—a sum that would break the neighbourhood’s previous sale record. Despite the obvious hurdles, the listing agent decided to set an offer date. My guess is that it won’t receive multiples offers and will probably sit on the market for weeks.
These properties aren’t fooling anybody. A savvy buyer doesn’t assume that there will be action on a property just because there is an offer date. In fact, I believe that when overpriced or less-desirable properties come onto the market with an offer date, it actually scares potential buyers away. Some properties might be sellable but a timid buyer afraid of getting into a competition could walk away.
In 2011, buyers have more access to information than ever before, and most won’t be tricked into a bidding war on a property that’s not worth it. You just can’t fool the market—even a red-hot one.
