Are bidding wars still a thing?

Dated: October 5 2021

Views: 97

Are bidding wars still a thing?

During the past couple of years, there has been a sharp rise in multiple offers, something we didn’t used to see in Ottawa and its surrounding areas. But are they here to stay? To properly answer that question, we need to understand what sets the scene for a bidding war.

To start, let’s talk about the listing price: a major factor in the equation. A property listed under market value will usually generate more interest and should have better odds that multiple homebuyers will want to submit an offer. When multiple offers are put on the table, the grounds for a bidding war are built.

Another element that can initiate a bidding war is the “hold offers” strategy, meaning that the sellers determine a date, usually a week after their property hits the market, to go over the offers they’ve received. When competing against others, all the while not knowing how much the competition is offering, homebuyers are tempted to offer tens of thousands, if not hundreds, of dollars above the asking price to make sure that their offer is accepted. This, again, sets in motion the bidding war playground and attracts pre-emptive offers.

Pre-emptive offers, or “bully offers” as others may call them, are submitted to the sellers before the offer presentation day. They are the first ones the sellers see and have a better chance of being accepted. To be considered and to beat out the competition, pre-emptive offers are aggressive in price and are written in ways to entice the sellers to accept them. For example, they may not have financing or inspection conditions, to name a few.

Finally, the volume of homebuyers versus the level of inventory is another factor that we need to take into consideration when talking about bidding wars. Limited housing inventory has several implications. You’ve surely heard the expression “supply and demand” and understand its consequences. It’s the same thing in the housing market. The fewer the properties on the market, the more they will be coveted, and buyers will tend to pay incredible amounts of money and do whatever they can to secure their dream home.

Although some homes in good condition that are priced right and located in certain neighbourhoods are still receiving more than one offer and selling over asking price, the bidding war scene from this past winter and spring is simmering down. Holding offer strategies and pre-emptive offers are not as common in today’s market, and the inventory level compared to the number of home seekers is on its way to balancing out.

If you would like advice or guidance during your buying journey, reach out to our team. We would be more than happy to chat about the market with you.

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