Are Toronto Homes Being Priced For Bidding Wars?
Buyers are frustrated and so are their real estate agents. I have been a Broker in Toronto for 26 years and I have witnessed many market changes and trends. Bidding wars are everyday occurances now in the negotiating process.
Pricing a home was always based on fair market value. How was this established? Recent sales of similar homes, on streets surrounding the property to be listed gave the agent a reasonable price at which to offer the home for sale.
Today, homes in the "hot pockets" of Toronto are often priced $100,000.00 under the fair market value. If in week one a home is priced at $749,000.00 and sells for $850,000, in week two a similar home is priced at $755,000.00 and sells for $860,000. The following week another house is listed and sells in the same price range. These three sales would establish the fair market value. However, the next home to come on the market is once again priced at $760,000.00. All these sale prices were a reuslt of a bidding war.This would give Buyers and Agents a clear indication that the home is priced below fair market value. Buyers and Agents have to realize that an offer on the home will go way above the asking price, if there is a multiple offer situation. Multiple offers are common.
Staging the home is now the in vogue. Out with the owner's furniture and family photos, in with the rented white sofas, coffee table books and white silk flowers. All to make the home impersonal, allowing the buyer to envision their own possessions.
Pre-inspection reports are available on most homes now in high demand areas. The Listing Agent emails the report to any Selling Agent that requests it. This saves a great deal of time (cost) for all potential Buyers and intrusion on the Seller. The Buyer must be aware however, that the inspection report is the property of the Seller. In order to have any repercussions against the Inspector if they fail to find something that shows up after they move in, the Buyer must pay for that report independently.
Holding offers off until the following week, usually after the weekend has become standard. Buyers and Agents viewing the home at overlapping times, create pent up buying frenzy. Now the buyer gets anxious to put in an offer, before the offer date (pre-emptive or bully offer). The offer MUST of course be well in excess of the asking price. Sellers have the right to look at the offer, work with it or continue to hold off before the "offer date" or decline to look at it.
Low mortgage rates, high rents and off shore investors all add to the bidding war frenzy. If a home is priced at fair market value, would there be bidding wars? I am often asked if there is there any end in sight. I don't see it in 2015.