I read a couple of real estate articles in the past two days regarding multiple offer situations or “Bidding Wars” as they are commonly known.
The first article, published in the Toronto Star on April 28, 2014 about a house in the Yonge and Lawrence area selling for almost double the list price. The house was listed for $699,000 and sold for $1,366,000 or 195% of the list price after receiving a total of 72 offers.
This article dovetails with the second article I read about the results of a recent survey by the Real Estate Council of Ontario which stated that slightly more than half of today’s buyers are influenced by emotion when making real estate decisions. The top factors when purchasing a home are as follows, price 96%, functional fit 95%, structural integrity 91%, and neighbourhood quality 91%.
However, 51% of home buyers admit to having been influenced by emotion when buying their home. According to the survey, this number jumps to 64% for younger home buyers, who are emotionally and financially vulnerable. This is what I call buying with your heart instead of your brain. I made that mistake myself when I bought my first home.
First time home buyers need to be extremely careful when they enter into a “Bidding War”. They need to make sure their REALTOR® provides them with all the information regarding comparable sales of the same type of home in the immediate area to enable them to make a SMART DECISION.
Buyers often times refer to their buying experience when there is a “Bidding War” as winning. In my opinion, the only time you win in an auction type situation is when you purchase something for under market value. Paying 30, 40, or even 50 thousand dollars higher than the most recent sale in the neighbourhood is not winning.
Some people refer to bidding wars as the “School of Fish Mentality”. Just because everyone else is willing to pay more for a particular house, buyers seem to think it is OK and the house will be worth it.
The Real Estate Council of Ontario is launching BE HOME SMART – a public education campaign to remind Ontarians of the tools, resources and protection available to help them make smart home buying and selling decisions.
When in doubt, call one of our Coldwell Banker Pinnacle Real Estate professionals to guide you through the buying or selling process.