Demystifying The Offer Date
The opinions expressed in this article are solely those of its authors, Allyson Scott and Jody McDonnell, and are not intended to represent those of Royal LePage Supreme.
A basic driving force behind real estate markets everywhere is a simple one of supply and demand: low supply + high demand = rising property values. This creates what is termed a “seller’s market”, because the sellers are in the driver’s seat of sale prices. Various factors have contributed to the current seller’s market, where there is not enough housing inventory to satisfy demand: older Canadians choosing to stay in their homes for longer than usual, investors (both foreign and domestic) snapping up secondary properties to use for rental income, historically low interest rates, and the international appeal of the GTA as a destination for immigration, among others.
When our clients decide it’s time to list their home, we investigate a property’s market value using a variety of techniques. Preparing a property comparison becomes more challenging when there are fewer sales, and properties often have many unique aspects to them. We review area sales, and then also consider the value of the different features, such as a semi-detached and detached home, or a finished vs unfinished basement, or a garage vs no garage, and so on.
Once a target price range has been agreed upon with our clients, we provide them with two marketing options: we either list the property at that reasonable market value and negotiate an offer when it is received, or we list the property just slightly lower than market value and hold off on receiving offers until an agreed-upon “offer date”. Of course either way, The Jody McDonnell Team ensures that our listings are presented in the very best light, and advise on home preparations from decluttering and painting to repairs and staging. All of our listings are professionally photographed and have virtual tours for maximum appeal and exposure.
Our team takes a specific approach to running the offer date marketing initiative. The reason we list the property at a slightly lower figure is to maximize the number of buyers who will see it in their online searches, to hopefully garner competing offers on offer day. We don’t list it at 50% below market value, which feeds those headlines in BlogTO of “Property sells for $1,000,000 over asking!!”, when the asking price wasn’t based on any real valuation. Once listed, we advise our clients that they can either choose to review pre-emptive (or “bully”) offers if they wish, or wait until the agreed-upon offer date. We generally hope that anyone wanting to place an offer on the first or second day will still show up to place an offer on the target day, but sometimes there are extenuating circumstances that make accepting a fast offer the best decision for our sellers.
This is one of the arguments in favour of holding offer dates: that all potential buyers have approximately a week to discover and view the property, and have a fair shot at placing a bid. With no offer date, or no policy regarding bully offers, properties can get snapped up in mere hours before buyers have even seen the listing, sometimes by a buyer who has only viewed it online.
Throughout the listing period, we follow up with all Realtors who show the property, and try to maximize the number of offers we will receive. On offer night, we fully vet the paperwork to ensure all important issues are addressed and everything is correctly completed. We review the pros and cons of each offer with our clients, which include more than just price: terms, conditions, closing date, and amount of deposit all come into play when deciding which offer(s) to work with.
Our sellers have the final say in how to handle the last stage of the process, which is whether to accept the best offer, ask for improvements, or not accept any offer at all and create an alternative marketing plan. While sometimes it just makes sense to accept a clear winning offer, there are times where it’s just not that straightforward. Does this always indicate there is a greedy seller behind requests to improve?
In our experience, it does not.
We have had more than one situation where the dollar value of offers have differed by $1,000 or less, or there are small differences in other terms driving a request for everyone to improve. We cannot by law disclose the details of the offers.
The issue creating the most contention is that one of blind bidding, and buyers not knowing how close their offers really are – or whether one is already the highest bidder, and chooses to increase their offer, essentially competing against their own bid. This is the potential situation that various levels of government continue to debate, but in our experience, it’s often impossible to say whether an open bidding process would actually change the outcome. If two offers are close in number but have differences in closing dates or deposits, and as listing agents we give both of them the chance to improve – who can say whether the final winning number would not be the same whether it is offered blind, or offered out in the open?
For clarity, let’s say Buyer A actually has the winning bid by $10,000, but Buyer B thinks they might have the winning bid. Buyer A is afraid of losing the house, so they increase their bid by a further $10,000, essentially competing against themselves. Buyer B chooses not to improve, and Buyer A gets the house. Had the offers been visible to everyone, who is to say that Buyer B would not have added $20,000 to their offer, realizing that’s how much they were behind?
Arguments can certainly be made for keeping the status quo or for changing to an open auction format, but for now offer dates and multiple blind offers are the norm. Whether we are on the selling side or the buying side, our team takes a consistent approach right from the start that begins with a solid property valuation based on facts, and our over 25 years’ combined experience. We help keep our sellers’ expectations realistic, and we help keep emotion out of our buyers’ offer process.
We have skills, knowledge, and integrity, and you can count on The Jody McDonnell Team to guide you through this seller’s market, and make your selling or buying experience a positive one!