What You Need To Know About Bidding Wars in Toronto

December 2, 2021 | Buying a Home

There is a lot of misinformation about bidding wars in the Toronto market. It is difficult to find someone who likes bidding wars. Buyers don’t like them because they wish Sellers could list homes at the price they want for them. Sellers don’t like them either because they worry that they’ll get less than market value by underpricing their homes.

Bidding wars are a large part of the market here, and, therefore, it is essential to understand them. Bidding wars occur when sellers intentionally underprice their home, and multiple buyers offer on the same house simultaneously.

Here are the top falsehoods that we hear about a lot and our corrections to them.

1) Every single house sells with a bidding war

This is not true. Bidding wars only happen when a home is underpriced, and not all houses on the market in Toronto are underpriced. It is also common for a home to be underpriced but get no offers on offer night. In this case, that home is usually re-listed at market value. Bidding wars are widespread in the Spring and Fall markets when there aren’t enough houses for the number of buyers. However, in the quieter months like summer and winter, bidding wars are not guaranteed, and sellers need to price their houses according to the time of year they are listing them in.

2) Bidding wars mean that buyers are massively overpaying

There is a lot of noise in the news and marketing about how much “over listing” a house sold for. If a place is listed for $1,000,000 and sells for $1,600,000, the story is that the house sold for 600k over asking, and, therefore, the buyer overpaid by $600,000. In reality, That house was very likely worth close to $1,600,000. It is common for buyers in Toronto to overpay for properties intentionally to beat out their competition; however, it is rare for a house to sell for a considerable amount above market value.

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3) There is a relationship between market value and the list price

The list price is a marketing tactic. The market value is the highest number that prospective buyers will pay for the house. There is no secret formula between the list price and market value.

4) If you list your house too low, you won’t get market value

This one is tricky because it is sometimes true depending on the time of year. Bidding wars only work in very tight seller’s markets where there are far more buyers than sellers. In these tight markets, it is generally true that the lower you list your house, the higher your price will be. However, when the market enters into its quieter time, you may want to be careful about massively underpricing your property because there is a chance that you won’t get a large number of people offering on your house.

5) The ultimate sale price is a mystery

Buyers often rightly feel like they are at a disadvantage in bidding wars. They feel like they are putting a price on a dartboard and hoping for the best. However, most houses will sell for around market value. Your real estate agent should be able to give you a value breakdown of the home based on the recently-sold similar places in the area. Occasionally, a sale price will surprise everyone, agents included, but the sale prices usually make sense.

★ We have an extensive library of resources to help buyers navigate the process:

If you are a seller, remember that bidding wars are ubiquitous in Toronto and are, therefore, often the best way to market your property. If you list your house at market value, you run the risk of buyers assuming that you want several hundred thousand dollars above your list price. If you are a buyer, remember that to get a house you love, you’ll likely need to compete for it in a bidding war. However, that does not mean that you will be forced to overpay for that home.

The best strategy is to hire a local agent that you trust and follow their advice.

Stay safe!

Robyn Vandervennen
The Kim Kehoe Team