Ask the Expert: What is a bidding war?
Due to the strong demand for housing in Toronto, we often have more buyers than sellers. This creates what is know as a "Sellers Market", where we have several buyers bidding on the same house creating a bidding war!
Sometimes I suspect this is done quite intentionally. The home is listed below market value to attract multiple offers. The unsuspecting buyers see the listing and think "Wow, what a bargain". There is a marketing period during which public open houses are promoted and agents can make appointments to show the home to their clients. An offer date is set to allow an ample period of time for all prospective buyers to inspect the home. Then on the day of offers you find out that you are competing with several other buyers for the property, and in order to win the bidding war you may have to provide a firm offer, with no conditions and pay substantially over the list price.
But , since the house may have been undervalued to begin with are you actually just paying fair market value? Technically market values is defined as:
- Market Value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgably, prudently, and not under undue pressure.
I think the key to this definitions is that market value refers to a transaction where the buyer is not under "undue pressure", which is definitely not the case in a bidding war.
Have a questions for the expert? Please call me at 416-486-5588 and I would be pleased to answer them.
Helga Teitsson, Broker
RE/MAX Hallmark Realty Ltd.
