An Online Bidding War… You Don’t Say!
Online Bidding Wars… Hmmm.
So this is an interesting topic which could cause a lot of controversy in our residential market…
I logged into MLS today and jumped to today’s new listings.
In today’s market, there are so many methods to listing the property. The hold back on offers with an offer date, the hold back on offers with an offer date but reviewing pre-emptives, the hold back on offers with an offer date and not reviewing pre-emptives, the 24 hour irrevocable, the 48 hour irrevocable… I could go on and on.
Anytime I see a new listing I go directly to the listing agents’ instructions on how they will be conducting the offer process.
Today’s encounter was an interesting one though.
I scrolled to the brokerage remarks on a townhouse listing in Queen West and saw that the listing brokerage would be conducting a 12 hour online bidding war.
This means that the listing brokerages website would host the bidding war for all to see.
During the 12 hour period of 9 am – 9 pm, you would be able to offer on the property. Your offer would be visible to all of the involved parties, including other buyers. This is new, we have not seen this in the Toronto real estate market to date.
As a buyer, when you place an offer on a property, your offer is confidential information. It is only to be communicated to the listing brokerage and the seller (As set out by RECO). The listing brokerage which is implementing this new online offer process believes that this method is best for all parties.
I’m not of the same opinion…. here’s why.
The current setup of the market is for the buyer to find their own valuation of a property. Yes, there are market pressures that sometimes inflate pricing to points where they should not reach. Although, sometimes these market pressures work out to be in the best interest of the seller.
This type of online offer process is strict to the benefit of the buyer and does the seller a disservice in every way possible.
The listing brokerage conducting this type of online auction, is of the opinion that if a buyer knows what the other offers are… they will be more inclined to increase their offer, over and over again… but when do you stop?
This I don’t buy… you want to tell me that our offer processes can be emotional? Australia has an open offer process where the buyers gather in person and big like an art auction. You are telling me that if it gets down to 2 people who really want a house… they arent going to be emotional in the offer process while they are looking directly at one another?
This is not the way the biggest asset of your life should be purchased. The reality is that you and your realtor need to find where you believe the value of the property to be, and approach the situation in a level-headed manner. Not to continuously increase your offer by $100 over a 12 hour period while you picture yourself in your new home.
I’m of the opinion that whether it be an open offer process or not.. the buyers will always reach the same offer they would have initially offered with our present-day system.
I think we would all like the process to be more transparent than it currently is.. but this is not the answer.
What are your thoughts?