Posted by genieSABRE on Aug 23, 2011
Housing market gone mad?

Housing market gone mad?

Bully Bids Symptom in Housing Market

Source:  Susan Pigg
Published: Toronto Star  Friday, Aug. 19, 2011

At first glance, 221 Lee Ave. is just a simple semi.
Its front lawn could double for a toboggan slope. Its neighbors are a hodgepodge of new infills and century-old homes. It’s hardly a knockout when it comes to curb appeal.

But 221 Lee Ave. does have one important thing going for it.
This week the meticulously renovated Beach home sold for almost $100,000 over its $699,000 asking price and has become just the latest symbol of a housing market gone mad.

“We decided to be a little aggressive and catch some people off guard and I think we got a pretty good deal,” says ReMax Hallmark Realty agent Ryan Taylor, who represented the buyer.
His client, a young woman who didn’t want to discuss the deal with the Star, is “ecstatic,” says Taylor. The 28-year-old agent is pretty happy as well.
He beat out at least seven other potential purchasers with a sharp weapon in the bidding wars arsenal — the “bully offer.”

With the Greater Toronto Area on track to record its second-best year of house sales ever, and interest rates likely to remain low until 2013, “it’s crazy out there,” said Taylor.

The pre-emptive or bully offer — go in early and well over the asking price — is being used as a desperate last resort by buyers weary of losing out in bidding wars.
It’s fuelled by high demand, coupled with an unusual shortage of new listings across the GTA in the past six months — especially in hot Toronto neighbourhoods such as Riverdale, Leslieville, the Beach and, to a lesser extent Roncesvalles, the Junction and Parkdale.

“This is not something I would do with a newbie buyer who hasn’t made an offer on a house yet. It’s a very aggressive purchasing strategy,” says Toronto real estate agent John Pasalis, who found himself out-bullied on a bully offer last spring for a Yonge-Eglinton area house that sold for $101,000 over the $1.15 million asking price.

“I find it’s just too much for buyers who are just jumping into the market and don’t understand the dynamics. It’s something that becomes a more realistic option after a buyer has lost out on two or three bidding wars.”

The strategy is remarkably simple, as it was with 221 Lee Ave., a top-notch reno in one of the city’s most sought-after family neighbourhoods.

Veteran ReMax agent Al Sinclair listed Lee on Monday, Aug. 8, and scheduled open houses, but with one caveat: no offers until Aug. 16.

The week-long window gives lots of time to show the property and stir up interest. But on a prime property like Lee, it has a far more desirous effect for sellers.

It creates a frenzy of longing.

Taylor’s client — a savvy young businesswoman and veteran of bidding wars — fell in love with the home during the weekend open house. By Sunday, she and Taylor were discussing strategy: Do you try to force through an offer early or wait until the deadline?

A comparable property had just been listed on nearby Kenilworth Ave. Anticipating the Lee homeowners might be nervous about the new competition, Taylor registered a bid from his client at 3 p.m. Monday — a day before the deadline — with a 6 p.m. deadline for the sellers to respond.

The bully offer took everyone off guard.

Selling agent Sinclair, who works with Taylor in ReMax’s Beach office, asked for an extension to 7.30 p.m. so his office would have time, as required by law, to alert all 31 agents who’d shown clients the property.

Within hours, six other bids were registered on paper and another by phone.

“I have no doubt there would have been at least 10 offers if we had waited until the deadline,” says Taylor.

Two offers were for more than $770,000. Taylor’s client came up by $20,000, nudging out the competition.

“My client was ecstatic. She thought the house would go for over $800,000,” says Taylor. “She’s very experienced and knows the value. And the house was listed very low.”

That night, when the buyer met the sellers and their 4-month-old baby, the buyer was so excited, she kissed the baby’s head. “Everybody walked away like they’d been dealt with fairly,” says Sinclair. “The best offer won.”

 

RELATED LINKS TO ARTICLES
How long can home prices keep rising?
Housing Starts Climb in July


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