Factors Driving the Surge in Multiple Offers

Multiple offers on real estate are back in Canada in 2024, leaving many Canadians wondering what this may mean for buyers, sellers, and agents. Whether you are looking to buy or sell in the current housing market, the first step is to establish why multiple offers are growing in popularity in some parts of the Canadian market, notably in Toronto and Vancouver.

The first factor to consider is the housing supply shortage. There is still demand for housing, but short supply left many Canadians feeling priced out of the market for the past few years. Now that some of the new, “affordable” housing supply has hit the market, aspiring buyers are scrambling to place offers on these well-priced, newly built properties in key locations.

Another huge factor is the anticipation of future rate cuts. Many Canadians were waiting on the sidelines as interest rates soared, scared to commit to a mortgage in such an uncertain environment. However, following a series of rate holds, and promised rate cuts later this year, many Canadians are opting to jump back into the market, expecting home prices to rise following the rate cuts.

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How to Stand Out in a Competitive Market

Now that we’ve established why multiple offers are surging, the next step is to prepare you to succeed in this new and ever-changing market. Unfortunately, standing out as a buyer in a multiple-offer environment can be especially difficult. Here are some strategies to help set you up for increased odds of success:

Get Pre-Approved for a Mortgage: Having a pre-approval letter from a lender demonstrates to sellers that you're a serious buyer who is financially capable of completing the purchase. Our Clover Mortgage brokers can help you easily get pre-approved with the best lender for you and your needs.
Make a Strong Offer: Offer a competitive price that reflects the current market value of the property. In a multiple offer situation, you may need to consider offering above the asking price to stand out. You can also consider including an escalation clause in your offer, which automatically increases your offer price if competing offers exceed it, up to a predetermined limit. Keep in mind that some markets, sellers, and agents frown upon the use of escalation clauses, and so this may not be an option for you.
Work with a Responsive Agent: Partner with a proactive and responsive real estate agent who can guide you through the process, submit your offer quickly, and negotiate on your behalf. Maintain professionalism and respect throughout the negotiation process to leave a lasting impression and increase the likelihood of your offer being accepted.
Be Ready to Act Quickly: In a competitive market, time is of the essence. Be prepared to act quickly when you find a home you love, so you can submit your offer promptly and increase your chances of being considered.

Maximizing Profit While Managing Multiple Offers

While we have already covered how to best stand out as a buyer in a multiple offer environment, how can sellers best position themselves to maximize profit in the current landscape? If you are thinking of selling your property in the near future, here are some potential steps that can help you position yourself for success:

Evaluate Each Offer: Carefully review each offer to understand the terms, including the offered price, contingencies, closing date, and any special conditions.
Consider Buyer Financing: Evaluate the strength of each buyer's financing. Cash offers or buyers with pre-approved mortgages may be more attractive as they pose fewer risks of the deal falling through due to financing issues.
Counteroffer Strategically: If none of the offers meet your expectations, consider making counteroffers to one or more buyers. Use this as an opportunity to negotiate terms that are more favourable to you, such as a higher price or fewer contingencies. Don't just focus on the offer price. Consider other terms that may be important to you, such as the closing timeline or the buyer's flexibility with move-out dates.
Work with an Experienced Agent: A skilled real estate agent can provide valuable insights and guidance throughout the negotiation process, helping you navigate multiple offers and secure the best deal.

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Tips for Real Estate Agents in Multiple Offer Situations

In a multiple offer scenario, real estate agents also play a crucial role in guiding their clients through the process and helping them secure the best possible outcome. If you are a real estate agent looking to navigate multiple offer scenarios, here are some tips to consider:

Educate Your Clients: Help your clients understand the dynamics of a multiple offer situation, including the potential for competition and the need to submit a strong offer.
Set Realistic Expectations: Manage your clients' expectations by providing them with realistic information about the current market conditions and what they can expect in terms of competition.
Advise on Pricing: Provide your clients with a comparative market analysis (CMA) to help them determine an appropriate offer price based on the property's value and recent sales in the area.
Highlight Strengths of Your Client's Offer: Identify and highlight any strengths of your client's offer, such as a strong pre-approval letter, favourable terms, or flexibility with the closing timeline.
Prepare for Multiple Rounds of Negotiation: Be prepared for multiple rounds of negotiation as the seller may counter multiple offers before making a final decision. Stay patient and persistent in pursuing the best possible outcome for your clients.

Legal Implications: Understanding Rights and Responsibilities in Multiple Offer Scenarios

In Ontario, the Real Estate and Business Brokers Act (REBBA) and its regulations govern the conduct of real estate professionals and establish rules for handling multiple offers. While there are also additional governmental and non-governmental institutions that impact certain rights and responsibilities in the space, here are some of the most important regulations related to multiple offers:

Duty of Fairness: Real estate agents must treat all offers fairly and impartially, ensuring that each buyer has an equal opportunity to submit their best offer.
Disclosure of Multiple Offers : Sellers must be informed if there are multiple offers on their property, and they have the right to know the number of offers received.
Handling Offers: Real estate agents must present all offers to the seller promptly and in accordance with their instructions. They cannot withhold or delay the presentation of any offer.
Best Practices: Real estate agents should follow best practices for handling multiple offers, including establishing a transparent process for reviewing and selecting offers.
Conflict of Interest: Real estate agents must avoid conflicts of interest and act in the best interests of their clients. They cannot represent both the buyer and seller in a multiple offer situation unless both parties consent to dual representation.
Documentation: All offers and related communications must be documented and retained in accordance with regulatory requirements.
Communication: Real estate agents must communicate openly and honestly with all parties involved in the transaction, providing clear and accurate information about the status of offers and the negotiation process.

FAQ

What is the real estate forecast for Canada in 2024?

While forecasts vary across the street, most of the Big Banks are predicting a slight downturn in housing prices followed by a continued upturn. This may lead to multiple offers on property in Canada for the foreseeable future, but it is impossible to know for sure.

What happens when you get multiple offers?

When you receive multiple offers, you'll review and compare each offer, considering price, terms, and buyer qualifications. If none meet your expectations, you may negotiate. Once you accept an offer, it becomes a binding contract. Backup offers may be kept in case the primary offer falls through. After notifying all parties, you proceed to closing with the accepted buyer.

How do you stand out with multiple offers?

To stand out among multiple offers, it is advised that you make a strong offer with competitive pricing, flexible terms, and a well-prepared pre-approval letter.