How to Navigate Offer Competition

When purchasing a home in GTA’s real estate market, it’s not uncommon for buyers to find themselves competing against other buyers. Also known as an ‘offer presentation’ or when a seller ‘holds back offers’, this happens when several buyers compete for the same property at the same time.

Let’s explore how an offer presentation typically comes about, and how best to navigate one should you end up in this scenario.

What’s an offer presentation?

An offer presentation occurs when a seller first acknowledges they have a property that’s in high demand. They then put their property on the market with a set offer date, usually 5 - 8 days after putting the home on the market.

In the actual listing, the seller’s agent will typically include the following: ‘Offers to be reviewed on Thursday the 26th of October at 6:30pm. Please register your offer by 5:30pm.’

Aside from the seller, nobody wants to get into a multiple offer situation. And if you’re unprepared, the process can be quite stressful for a buyer.

How do seller’s pull off an offer presentation?

Let’s look at some of the reasons why offer presentations occur:

1. It’s a seller’s market, meaning, there are simply more buyers in the market than available properties.

2. The market is balanced, but the property’s asking price is at a popular price point. In most cases — the lower the price, the higher the demand.

3. The market is balanced, but a seller’s property is on a particularly desirable street or within a desirable condo.

I’ve often seen frustrated buyers blame the listing agent for inciting offer competition. But in my experience, most sellers are sharp enough to know when they own a property that can successfully create offer competition. Those sellers will then hire a realtor who is skilled enough to successfully facilitate the process.

Can offer presentations benefit the buyers?

Yes, because offer dates provide everyone with a fair chance to view the property.

There’s a common scenario I’ve witnessed time and time again: A home comes on the market that’s well-suited for one of my clients. But the property does not have an offer date, meaning the seller will entertain offers at any time.

It’s a competitive seller’s market, so I advise my client that we should look at the property as soon as possible. Although my client is very eager, they have work commitments and can’t view the home until tomorrow afternoon. I book the showing, but later that day, I get an email stating the property is now sold.

This is exactly why offer dates can still benefit buyers. It provides a fair opportunity for all interested parties to see the listing in person, and then decide if they want to pursue it. Offer dates allow everyone to do their homework and prepare their best offer.

On the other hand, when a home is listed without an offer date, it can make buyers anxious. They will feel pressured to drop whatever they’re doing, and see the property before someone else swoops in with an offer.

What if an offer date backfires for the seller?

You’d be surprised how often this strategy can fail. And it’s usually a case whereby the seller got greedy, or their agent misjudged the temperature of the market.

A failed offer presentation usually looks like this: The seller lists with an offer date. But the offer date eventually comes and goes — with zero offers in sight. The listing agent nervously calls all of the agents who brought potential buyers to see the place. And each agent says similar things: ‘My client wasn’t interested enough to compete’ or ‘My client bought something else’.

This is why listing with an offer date is a risky move. The seller and their agent must be absolutely certain that market demand is strong enough for this strategy to succeed.

Because other agents can see a listing’s full history, a failed offer date can be devastating to the seller. Their property becomes stigmatized, since future buyers now know the home failed to sell. Many will think, ‘There must be something wrong with the home if no one wanted to buy it.’

What are some strategies for competing buyers?

The strategy you choose as a homebuyer will depend on a couple of things: Your overall tolerance level for risk, and the expected competition.

An experienced agent should be able to provide a solid sense for the amount of offers a property will receive, and at what price it will likely sell. When talking about this though, make sure your agent provides you with relevant data to support their position. This includes market trends for the neighbouring area, plus comparable properties that have recently sold.

Aside from the price you’re willing to pay, a seller will also look at the following to determine the strength of your offer:

• Deposit amount
• Conditions, if any (an offer without conditions, such as financing, will be much stronger)
• Proposed closing date

Those factors individually may not be as important. But when combined, they can easily make the difference between an accepted or rejected offer. When the top two offers are almost identical in price, the seller will always assess the more peripheral details, such as the closing date, conditions and the deposit amount.

Final thoughts

I always tell my clients we must determine how much they’re willing to pay before entering an offer presentation. That way, I can assess the likelihood we secure the property against the competition.

Remember: An agent’s priority should be more than just ensuring you’re the buyer who scores the home. But rather, that you secured the home with the smallest price difference between your offer and the 2nd highest-ranking offer.

As I said earlier, always set your price cap before the offer date. This way, you don’t risk acting irresponsibly with your budget. I can help you choose a price cap based on logic (such as market temperature and past comparable solds), not emotion.

And if you end up losing out in offer competition, not to worry. Just know you did your best, and there will be other properties out there. When navigating a competitive market, securing a property is always a process. It can take time, but it always works out in the end.

I hope this article has been informative! If you’d like to learn more, reach out anytime for a no-obligation discussion about your property search.

You can call me at 416-278-0182 or send an email to harishan@strata.ca. I’m always happy to help!