The Ultimate Guide to Bidding Wars for Buyers and Sellers

September 22, 2022 | Buying a Home

Bidding wars are common in Toronto, but nobody likes them, and very few people understand them. For a good reason! They are complicated and shrouded with mystery. Bidding wars have become a hot topic because they came up a lot in the most recent federal election. I’m here to set the record straight with an ambitious goal to provide you with the “ultimate guide” to bidding wars for both buyers and sellers.

No one likes bidding wars. Sellers hate the uncertainty and wonder why they can’t list their house for the price they want. Buyers hate them because they don’t like the mystery of blind bidding and not knowing what price they are competing against. Bidding wars are the norm in markets like Toronto because they do often generate the most amount of money for the sellers, and, in a seller’s market, seller calls the shots.

Bidding wars happen because sellers will intentionally underprice their homes and set an offer date. Ideally, on that offer date, several buyers come forward with offers. Due to privacy laws, the sellers and the seller’s agent are not allowed to disclose the contents of any buyer’s offers to the other buyers. Buyers are ‘blind bidding,” meaning they don’t know what prices the other buyers are offering. After the seller has reviewed all their offers, they can decide if they want to accept one offer or send every buyer back and ask for more money. The seller is obligated to give all the buyers equal opportunities and, therefore, if they ask any buyer for more money, they need to ask all prospective buyers if they want to offer more money. At that point, the buyer can determine if they will stay where they are or increase their offer. This is the part that drives buyers crazy because they feel like they are competing against themselves. They don’t know if they are already the highest offer, and they’re being asked for even more money.

For Sellers

Hire the right real estate agent: It is crucial to hire a local real estate agent who understands the value in the area. Underpricing a house requires knowing what the buyers in your neighbourhood are accustomed to. If your listing price is too high and everything else in your community sells for 30% above the list price, no one will come to see your house. If it is too low, you may not reach market value even with multiple offers. The right agent will know the sweet spot for your home.
Be realistic: It absolutely makes sense that you want a lot of money for your house. However, if you have five or six offers on the table and none of them is as high as you were hoping for, you should take that as a sign that the market has dictated the value of your home.
Don’t play the game: Everyone has heard the stories of buyers being sent back for more money multiple times on offer night. As the seller, you should try to get as much money as possible, but limit the amount of back and forth to two times, three times maximum if two buyers are close together. If you send buyers back many times, the buyer who ends up winning the offer will feel taken advantage of. Preserving the goodwill between buyer and seller is extremely valuable.

Don’t Panic: It does often happen that sellers don’t get any offers on offer night. Don’t panic! In this market, you will still be able to sell your house, probably at a price that you’re happy with. If you don’t sell your house on offer night, the best thing to do is to re-list it at the price you want for the home and accept offers at any time.

★ For more seller resources check out:

For Buyers

Hire the right real estate agent: Being successful in bidding wars is all about knowing the value of the home you are offering on, regardless of the price. The only way to know the home’s value is to thoroughly review the recently sold comparable properties and make adjustments for the home that you are buying. This takes a lot of experience and local knowledge.
Forget about the other buyers: Buyers often fall into the trap of figuring out what the people they are competing against are offering. Unfortunately, this attempt at mind-reading will have you constantly losing your offers. If you are overly worried about what other buyers are offering, that means that you are deeply concerned about overpaying for the house, and you will end up always under-pricing your offers. This is how you lose out on houses time and time again. Instead, you should pretend it is just you and the seller in a room together. The seller is asking you for your top dollar. Do you want to spend that on this house or not?
Be the highest offer: Winning a bidding war is simple. You need to offer the most amount of money. You do this by determining the value of the house, based on the recently-sold comparables, and then offering slightly more than the value. Yes, you read that right. Everyone else will be offering at, or slightly below, value. If you want to win your bidding war, you need to “put some sugar on top,” as Kim says. It will feel like you are overpaying, but when the market goes up again in a few months, your house purchase will look like a deal.
Clean up your offers: The only way to win a bidding war is to offer the most amount of money. The second most important factor is to make your offer free of conditions and to include a bank draft on offer night. Try to do all your due dilligent in advance of making an offer. Get pre-qualified for a mortgage and do a home inspection (or review the seller’s home inspection) before making your offer. The goal here is not to put yourself in jeaprody but waiving your rights to home inspections and financing. Rather, do front-end this work and do it prior to putting in an offer.
Don’t Panic! It is easy to feel overwhelmed in a bidding war. But, the truth is, there will always be another home. If you don’t win this offer tonight, the chances are good that you will win a bid in the following few weeks for an even nicer home.

★ We have an extensive library of resources to help buyers navigate the process. Check out these posts that are a must-read for anyone entering the market:

Bidding wars are a fact of life in the Toronto real estate market. However, they don’t need to be scary. For sellers, they are a great way of marketing your property and getting as many buyers through the door as possible. For buyers, you are not expected to offer a price that is massively over market value. The end goal is to get you into a new home that you will love for years to come. The bidding war is the way you get there.

Let us know if you have any questions about this.

As always, stay safe.

Robyn VanderVennen
The Kim Kehoe Team