A lot of news has come out recently about bidding wars in the current real estate market. Are they good for sellers? How can buyers win a bidding war? How exactly does a bidding war work? 

Like many things in real estate, there are a lot of opinions circulating. As Hamilton realty experts, we’ve seen it all. So let’s take a closer look at some of the facts about real estate bidding war rules in Canada. 

What’s the Difference Between a Bidding War and Multiple Offers?

In today’s hyper-competitive Seller’s Market, most houses for sale are going into multiple offers. This means that numerous buyers are submitting offers on a home and the seller has the opportunity to choose one of the offers or choose to negotiate with specific offers. 

It’s easy to tell why multiple offers are beneficial for sellers. 

A bidding war is usually an escalation from a multiple offer situation. In many cases, the listing agent will encourage buyer’s agents to raise their offers to be more competitive once they start receiving initial offers. 

Looking for a home for sale in Hamilton? Learn more about what’s available for sale in Hamilton here. 

Are Bidding Wars Legal in Canada? 

As of right now, bidding wars are completely legal in Canada. However, there are numerous rules and ethical standards that regulate the ability to incite a bidding war in real estate. 

For example, all real estate agents in Canada are held to a certain standard by the Canadian Real Estate Association (CREA). The CREA requires all real estate agents to always act in the best interests of their clients. For sellers, that means getting the highest possible price for their home, but for buyers, it becomes slightly more difficult because it means ensuring that they do not overpay. 

This is a challenge in today’s market when it seems that almost every property is selling over the asking price. 

What’s the difference between a seller’s vs. buyer’s market? Find out here. 

The CREA also requires agents to remain perfectly transparent and disclose any instances where they represent both the buyer and the seller in a transaction, or if they possess any confidential information that could give a competitive advantage when placing an offer on a home. 

It’s important to note that some regulations might be different from province to province, so it’s always a good idea to do your own due diligence research when working with a new agent. 

In many cases, inciting a bidding war in real estate is a strategic move that helps the seller maximize their sale and get the most money with the fewest conditions. 

Bidding Wars in Ontario 

According to the Ontario Real Estate Association (OREA), bidding wars in real estate are fine, as long as they follow certain rules. For example:

• A listing agent cannot claim there are offers on a home without proof of a signed written offer. 
• A listing agent must disclose the true number of signed written offers they have received when a buyer asks

Learn more about making an offer on a house in our blog post right here.

What is A Blind Bidding War? 

You’ve probably heard a lot about blind bidding wars in real estate lately. It’s been a hot topic ever since the market began its selly frenzy at the start of the pandemic. 

Blind bidding refers to a bidding war where buyers have no idea what other buyers are putting on the table. From the perspective of getting the fairest deal on a home, blind bidding can be dangerous because the winning bid could be thousands or even hundreds of thousands of dollars above the second-highest bid.

In fact, the Liberal government even proposed to put an end to blind bidding as part of their “Homebuyer Bill of Rights” in their new housing plan. You can read more about that right here.

While many critics of blind bidding say that putting an end to these blind bidding wars is one of the primary ways to cool the housing market and bring prices down, others feel that home auctions are perfectly fine and that it should be up to the seller to decide how they sell their property. 

Bidding War Advice For Sellers

Depending on numerous factors including the location and type of home you are trying to sell, some agents might actually encourage inciting a bidding war. By pricing your home low, they can stir up excitement and create urgency among buyers. Once the bidding war begins, you will likely see the offers go up above the asking price, and in some cases even above the appraised value of your home. You might even see buyers try to sweeten the deal with fewer conditions and offer to buy the house “as-is,” even going so far as to waive their right to a home inspection. 

However, because of their frenzied nature, bidding wars in real estate can get messy and complicated if you do not have an organized and professional agent helping you facilitate. It’s important to stay on top of bids and communicate clearly with all buyers involved. 

If a bidding war gets out of hand, it could result in parties walking away and deciding your home is not worth the bother of going through the bidding process. 

Bidding War Advice for Buyers

For a buyer, the number one question is usually, “how high do I go in a bidding war?” And the answer depends entirely on you, your budget, and your desire to own the property. Bidding wars are almost never beneficial for buyers since they always rely on making the best possible offer to appeal to the seller. 

Many agents even advise their clients against entering into bidding wars since they so often result in paying too much for a property. However, in today’s market, bidding wars are becoming harder to avoid. 

To win a bidding war, you need to be prepared to offer more than the competition. This could come down to things like offering more money, a more appealing closing date, or fewer conditions such as waiving your right to a home inspection. But it’s all about your risk tolerance. In some cases, buying a home without a home inspection is a terrible idea.

Other ways to help you stand out in a bidding war in real estate is to make sure your offers are presented well and that you are organized and on time with all deadlines.  

Whether you are buying or selling in today’s market, the experts at Michael St. Jean Realty can help you come out on top. If you have a question about buying or selling your home, call us at 1-844-484-SOLD or email us here.