About 30 per cent of the 15,000 inquiries the council has had in the last year are from house hunters overwhelmed by the multiple bids process, says Bruce Matthews, deputy registrar in charge of complaints for RECO, the regulatory body for Ontario’s 58,000 realtors.
What’s most worrisome is how many homebuyers have waived home inspections in a desperate bid to win the house of their dreams, only to end up with a nightmare of costly repairs and upgrades later, says Matthews. More
Bidding wars are not a new phenomenon; they have been with us for most of the last 15 years since the current boom began in the late 1990’s. Recently, the number and intensity of these bidding wars has been increasing, particularly in the “old” city of Toronto. There are several reasons for this. First and foremost, the inventory of homes for sale remains extremely low while the number of buyers remains extremely high. This is simple supply and demand. Second, there is a pervasive sense that interest rates will be rising, and this is adding a tinge of desperation for some buyers fearful of being squeezed out of the market as prices become unaffordable. Finally, realtors are simply getting better at the bidding war process. From the early days, when realtors started delaying offers by a couple of days to create a bit of breathing space when buyers started showing up within hours of listing a home for sale, the bidding war process has now become virtually institutionalized. A new listing appears early in the week; open houses are held the following Saturday and Sunday; and offers are invited early the following week. This allows for the maximum traffic through the house without letting the listing get “stale”. The key to eliciting a very high price in this process is that the bidding is closed: each bidder knows how many other offers there are, but not the content of any other offer. As a result, it’s not uncommon for the winning bid to be enormously higher than the next highest bid.
Unless the rules or laws are changed to forbid these closed bidding practices, bidding wars are going to be with us as long as there are low interest rates and low inventories of homes for sale. Buckle up, it’s going to be a wild ride over the next couple of months.