Well, considering I’m preparing an offer on a property that has 5 offers today, the easy answer is ‘yes’!
However, it’s worth pointing out, the term “bidding wars” is often thrown around with a lack of understanding.
Multiple offers or competing offers are probably more accurate descriptors.
I think the term “bidding wars” leaves the consumer with the impression that there may be a back and forth between buyers who essentially out-duel one another with bids until the winner prevails! Not quite exactly how it goes, but let’s have look at the market in front of us, and I can explain what has changed and what has stayed the same.
I have been selling real estate in Guelph for 15 years now – wow, it sounds long even saying it! Although I look at the year between 2016 and 2017 as the most aggressive seller’s market I have seen in that time…
There have always been multiple offers.
If something was priced right, people bid. Simple as that. The difference was just how far people pushed. During my second year in real estate I was on the unsuccessful end of 27 multiple offer scenarios. What happened? Was I just not any good at what I was doing? No, I do not believe that to be the case. Rather I perhaps had an unrealistic approach to the growth patterns of real estate and failed to realize that real estate always makes us looks silly. What looks expensive one year looks like a great deal the next year.
There is a conditioning we go through with anything which holds any value.
For example cars, houses, vacations etc. where it takes time to get used to what something costs now, but then we readjust and have an easier time paying for it.
My father was in the parking lot business – yes, paid parking lots in Toronto. He rented pieces of land and operated them as public parking lots. I worked for him every summer, and this was my first lesson in “supply and demand”. As the parking lot filled, the prices would change. I can still remember the look on the first customer’s faces that drove in when I had turned the sign to a make-shift $20. That seems to be a bargain now.
So why have there been “bidding wars”, as people loosely call them, for all this time?
Well frankly we just have never had enough supply and the city’s population has been growing.
That year when I learned a hard lesson about how many times my clients would want to buy a house, someone else would be there too. Homes weren’t selling for 50k over, but they would go for asking price or in some cases 5-10k over, which seemed so aggressive at the time. “They overpayed!” we would say in the office the next day, trying to make ourselves feel better and smarter. But I soon realized that with Guelph’s consistent increasing value, that “extra” 5-10k paid was more than made up in a year, and the new owners could relax and start to enjoy their purchase which in a short time would be seen as a bargain.
Let’s put things in perspective:
Over asking price, under asking price, or just asking price really doesn’t matter…
Depending on what the property is worth. If I price a 500k house at 400k and it sells for 515k, did it really go for 115k more than it should? No, it’s our perception that says that. You do have to acknowledge that in order to be successful in a multiple offer scenario, you in most cases have to pay the most. Sure, conditions and closing date factor in on the sellers decision, but more often than not the dollar is what they pay attention to the most.
Have I clearly explained what is happening in our market? I think so. Really nothing has changed. Sure, compared to a couple years ago people are not paying that much over what the asking price is, but I have seen some houses go for 100k over this year, and I have seen others go for 100k less. What was the difference between them? How they were priced and supply and demand conditions.
Whether or not there are bidding wars shouldn’t be the determining factor of why you get in or get out of the market.
Remember real estate is always about “time in”, not timing. I know I have said that before but I love the thought. It has helped me understand how to get the most out of my real estate investments – “buy then wait”.