Holding Offers 101
With “Spring Market” going on now in Durham Region we are seeing more and more Sellers and their Agents “Holding Off Offers” on homes being listed on MLS. So what exactly does this mean and how does it work?
What happens is that a Seller and Realtor bring a property to the market, typically through MLS, with a note in the Broker’s remarks. These remarks (something that the general public doesn’t see) indicate that showings are permitted for people to view the property but offers, if any, will be reviewed at a specified later date. When listing a house and holding offers, the asking price of the property is either priced at market value OR it is priced significantly below market value to open up the Buyer pool and create a bit of a frenzy around the property.
So what is the purpose of this strategy? Realtors say they use this strategy because they want to ensure that their marketing of the said property has enough time to reach a vast amount of people. The more people through the door, the better chance of more people falling in love with the property. Many people believe that this is just a ploy for Realtors and their Seller clients to manipulate the market; to force multiple offers in an “auction-like” scenario. When faced with losing a bid for a property, Buyers (and this rings true for all purchases not just homes) often let their emotions get the best of them. It often happens that they end up getting caught up in the competition and overpaying for properties because they don't like losing. It’s important to note that this strategy as a whole, while it has been very successful for many Sellers, has also been unsuccessful.
Sometimes at the end of this "no offer" period there are no offers that have materialized which can be devastating to a Seller. Alternatively, only one “low ball” offer comes in for the property that the Seller is unwilling to accept. This too adds more stress to an already stressful time.
When you are weighing your options out on if you should “Hold Offers” you need to:
1) Keep in mind the level of available inventory in your market. Less homes up for sale in your area means that getting a higher price is likely.
2) Remember that pricing a home is not an exact science. If you got 5 Realtors in a room and asked them to price a house you’d most likely get a least 3 different answers.
3) Figure out in advance if you can handle it if this strategy doesn’t work. This is important not only because of stress, but because if it fails, Buyer agents will know that the property didn’t get sold and will most likely bring an offer that is under asking since there is limited competition for the property. They might very well be the only ones interested in it, giving the Buyers an upper hand in the negotiation.
Regardless of what you decide when faced with this situation, we always advise our clients that the LIST price of their home must be a price that they would be willing to accept. It may not be their goal, but a house is only worth what someone is willing to pay for it (within reason of course).