A new paradigm now exists for Toronto real estate – while prices are still high, sales volumes are down significantly since the spring, while new listings have jumped.
Those wanting to purchase a home now have more choice, and this shifting sentiment is reflected in the sales statistics collected by the Toronto Real Estate Board. September’s figures showed a 35 per cent decrease in sales compared to the same period last year, although the average price is still 2.6 per cent higher.
That kind of organic price growth is much more sustainable over the long-term, and was exactly why the Ontario government introduced its Fair Housing Plan in April. However, the cooling of the market also means some semblance of power returning to buyers’ hands – and that may come in the form of bully offers.
The Return of the Bully Offer
At the peak of the market earlier this year, bully offers were par for the course. Any desirable property would usually have multiple bully offers, so much in fact that the strategy became pretty ineffective, explains Zoocasa sales agent Chantel Crisp.
“In the frenzy of a market we just had, everybody was giving bully offers, and it started to become the norm, so sellers just ignored the offers and waited until offer night,” she says. “A strategy that was unique became common practice, but the market has changed, so it is a tactic to use again.”
Trusting the Market’s Strength
Despite the market being down presently, buying a home in Toronto certainly doesn’t come cheap. According to TREB, the average selling price in September was $775,546, and to use a bully offer effectively a buyer must have their finances in order to make a quick transaction.
“It has to be an enticing enough offer that they are eager to accept and not wait until offer night to see if there are multiple offers,” says Crisp. “From a buyer’s perspective, a house is going to sell at a certain price range. There is always a range, there is never one price for a house – it will sell based on recent comparable sales.”
Using a bully offer therefore will usually mean paying over the listing price, but this may save the buyer more ultimately. The alternative is the seller waiting until offer night, meaning the likelihood of multiple offers increases, and a bidding war could materialize. That outcome was much more common a year ago, and it’s certainly something any buyer will hope to avoid.
“It in the buyer’s interest to try for a bully offer and see if they can get the house without having to compete with other buyers,” says Crisp. “A bully offer does not mean that you won’t compete though. The listing agent has an obligation to notify all showings that have been completed up until that point to give them fair opportunity to also bring an offer if they want.”
Why Use a Bully Offer?
The main aim of the bully offer is to expedite the process, which may suit both parties. Normally, however, the interests of buyer and sellers don’t align so well. Most sellers will prefer to wait until offer night, so convincing someone to sell beforehand will require more than just gentle persuasion.
“It increases your chances of being the lone ranger in the pack,” says Crisp. “When you present a bully offer, it should be a clean offer with no conditions and deposit in hand. It should not give the seller any reason to turn it down.”
Another factor to consider before making a bully offer — do your research. As a strategy, it requires knowing the lay of the land, which is where a good agent proves their worth.
“The listing price doesn’t really matter; what matters is what the house is really worth,” says Crisp. “Usually a bully offer comes when a house is priced really low. And the way we find out how much a home is worth is from all the recent comparable sales in that area.”