The term “overbidding market” has been around for a few years in Quebec, and we’re hearing it more and more. What exactly does it mean, and what are the repercussions for buyers and sellers?
Numbers don’t lie
The accepted price for a property in Greater Montreal now tends to be higher than the original listed price: that’s how hot the market is!
In fact, it’s not uncommon for several buyers to negotiate at the same time to purchase the property they’re after, simultaneously offering several thousand dollars more than the asking price. “I’ve seen buyers offer up to 20% more than the asking price,” observes Katia Samson, real estate broker and founder of Groupe Immobilier Katia Samson, an office specializing in the Sud-Ouest and Griffintown districts, affiliated with the Re/Max L’Espace agency.
In real estate, overbidding occurs when more than one promise to purchase is submitted simultaneously for the same property. For fear of losing the house or condo they want, buyers increase their offers. And the conditions and amounts of the offers are not disclosed to other potential buyers of the same property.
“The risk for buyers is to pay much more than the seller would normally have accepted if there had been no more than one offer,” says Ms. Samson. So we find ourselves in a more emotional situation than usual.
Is there an ideal amount that should be allocated to increase the price of an offer? Every case is different, according to the real estate professional: “I always suggest that my customers offer the maximum amount they’re willing to pay, so as not to have any regrets. Sometimes, the difference between an accepted offer and a rejected one can be as little as $1,000. But it’s not just the price that counts: the conditions are important too.
Above all, protect yourself
Despite the frenzy of the current market, even if you’re in a hurry, you should never forget to protect yourself in the transaction you’re about to conclude. For example, removing the inspection from the conditions of sale could have serious consequences, and could considerably increase the amount of money you’ll have to spend on work once you’re the owner.
In the case of condominiums, we make sure to read the documents carefully if we remove this condition. But if the building is in good condition and you know the co-owners who have lived there for a long time, or if a reliable report is available, you could, in a pinch, skip the inspection.
In an overbidding market, the speed and pressure with which transactions are carried out can sometimes be to the detriment of buyer protection. To avoid this type of headache, it’s always best to work with an excellent real estate broker!