Bidding Wars in Toronto west

This is an interesting topic from Mark Weisleder on Bidding up offers and multiple offer protocol. Simply put the ethics and logistics of how and why one offer is selected over another.

http://www.moneyville.ca/article/1013066--caught-in-a-bidding-war-know-the-rules

Most sellers will instruct their agent to tell this anxious buyer to wait until the proper time period. However, if the seller wants to consider the offer, their agent will then change the information on the MLS listing immediately to notify every other agent that the rules have changed, and that offers can be submitted that evening. The agent will also likely call every other agent who has expressed an interest in the property to tell them personally that offers can now be brought immediately.

When a buyer agent has a signed offer, they will usually call the listing agent office to register their offer verbally. There is a protocol that has been established in Toronto that if you were the first to register your offer, you will be given the first opportunity to present it to the seller in person, if there is more than one offer. This is just a protocol, and does not have to be followed by every real estate firm.

However, an offer is not completed unless it is communicated to the seller or seller’s agent, either by personal delivery, fax or email. Therefore, a buyer can still cancel their offer at any time before it is communicated. That is why an offer might be registered but never delivered. The buyer changed his or her mind.

Why can’t we have a silent auction? When buyers make offers through an agent, the agent has an ethical obligation not to disclose the contents of any offer to any of the other buyers. A seller agent can only tell all other bidders how many offers were received. They cannot tell the price or identity associated with any of the offers. However, a private seller could take one buyer offer and just show it to another bidder. This is one of the main reasons private sellers have trouble creating bidding wars.

There is one glaring singular omission; While you purchase the house emotionally and the justify your purchase with logic, the reality of overbidding, Paying over the asking price, needs to be justified to the lending institution with an appraisal.

If you are buying the house with cash and this is what you want to pay, No Problem. If you are financing the property with 15% down and you pay 20 % over the asking price the Mortgage company may ask you to add additional downpayment. ( you over paid) In this senario we see houses that have sold for huge multiple bids, only to be back on the market and embroiled with litigation over the failure to close ( specific performance ) and who gets the deposit.

I invite your comments, add your story to help others understand our local real estate market.

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