The bidding war phenomenon, common in the Quebec real estate market for a few years now, has intensified in recent months. What does this mean exactly, and what is the impact for buyers and sellers?
Truth in numbers
In the Greater Montreal area, the price paid for a property is generally higher than the original list price now. This is a good indicator of how volatile the market has become. In fact, it is not uncommon for several different buyers to submit offers on the same property—and in trying to outbid everyone else drive up the price by thousands of dollars. “I have seen offers go as high as 20 percent above the original list price,” says real estate broker Katia Samson, founder of Katia Samson Real Estate Group specializing in the Sud-Ouest and Griffintown neighbourhoods and affiliated with the Re/Max L’Espace agency.
In real estate, bidding wars occur when a property receives more than one promise to purchase. Because buyers are afraid of losing the house or condo they want, they increase their offer above the original list price. However, the conditions and dollar amount of these offers are not revealed to other potential buyers.
“There is a risk that you end up paying much more than the seller would have normally accepted had there been only one offer on the table,” Samson cautions. Buying a home is usually a very emotional process, which can escalate to a more intense level when embroiled in a bidding war.
Is there an ideal amount by which you should increase your offer when in a bidding war? “I always suggest that clients offer the maximum amount of money they are willing to pay to avoid any regrets,” says Samson. “Sometimes only $1 thousand separates the accepted offer from those that were rejected. But it is not just a matter of price, you also need to take into consideration all of the other conditions.”
Above all, buyer beware
Today’s tumultuous housing market often calls for swift decisions. Even if rushed, you should never forget to protect yourself when concluding a transaction. For instance, removing the inspection from the conditions of a purchase could create major problems down the road such as unforeseen costly repairs once you own the property.
In the case of a condominium sale in which this condition is revoked, make sure to carefully read all documents. Consider waiving the inspection report only if the structure is sound and you know the current owners have lived in the building for a while, or if a report from a trustworthy source is available.
Bidding wars are almost the norm today. And sometimes the speed at which transactions are concluded is at the expense of adequate buyer protection. To alleviate this type of added stress, always work with a knowledgeable and reliable real estate broker who will look out for your best interests.