As Toronto’s real estate market heats up, bidding wars to buy property are becoming more common and fierce.
A bidding war is when multiple offers are made for a property, which is often listed below market value prices to encourage bidding. After a few rounds, the seller decides which bid to go for — some of which can be tens of thousands of dollars over the asking price.
“[Bidding wars] perpetuate and further inflate the pricing each time,” real estate agent André Kutyan said. “Each time a buyer misses out, they look at the next one and say, ‘What if I spent a few more thousands to secure it?’ Then they figure, let’s secure it and stop looking.”
What is driving the bidding wars is a simple supply and demand equation, Kutyan said. There is simply way more demand than supply currently, something he doesn’t see changing as long as Ontario is in lockdown and people hold on to what they have.
The Toronto Regional Real Estate Board (TRREB) said in a recent report that the average home price in Toronto has jumped 21.6 per cent to $1,097,565 from $902,787 last year. Sales have also gone up 97 per cent from last year in March to a record 15,652 from 7,945.
While listings have also gone up about 57 per cent, to 22,709 from 14,434, demand still outstrips supply, according to TRREB.
The market has now come alive since the early days of the pandemic, driven largely by low interest rates, Kutyan said.
The pandemic has also played a role in driving demand, since everyone is stuck at home and looking to upgrade their space now that they’re now spending more time there and using it as a workplace, according to Kutyan.
The lack of supply and high demand has led to aggressive bidding wars.
“I’m seeing buyers hop from one property to the next, even within the same day, or within 24 hours,” Kutyan said. “It’s a lot of pressure, it’s difficult to manage, it’s frustrating. They got to get aggressive.”
Real estate agent Jamie Dempster said he is seeing offers come in up to 20 per cent over the listing price, and up to 12 bidders for one condo.
The aggressive bidding, though, is leading to what he calls “buyer’s fatigue,” where buyers may have lost out on a number of bids, so they come in with a huge offer on their next prospect just to not lose it.
In such a fierce landscape, both Dempster and Kutyan recommend teaming up with a realtor who knows the area well and has experience dealing with bidding wars.
“It can actually be a very frustrating process if you don’t have the right person helping you understand,” Dempster said. “What we do as agents is decipher all the information and really help buyers understand the true value of a condo.”
Otherwise, Kutyan said that buyers will place a bid way below the true value of the condo, and essentially end up spinning their wheels, getting nowhere.