Caution: Bidding War
Saturday, April 5th, 2014
As our market continues to favour sellers, there are more and more homes being sold for higher than asking, in remarkably short periods of time. In February, one out of every five properties sold in Calgary went for above list price, and buyers in March have been even more aggressive; I set up five showings for a condo last week on its first day on the market, and it sold within 24 hours.
This is the reality right now: supply is low, and demand is high, especially in attractive locations. But there are real downsides associated with getting caught up in a bidding war, of which I strongly caution you to be aware.
It’s easy to fall in love with a home when you tour it for the first time: if the seller’s done a good job presenting his property in its best possible light, it can look absolutely flawless. Stepping away for a couple of days, looking at other homes, then coming back to that first property can be a real eye opener, as the inevitable compromises and areas for improvement become more apparent. Unfortunately, when the market is as heated as it is right now, you simply don’t have the luxury of time to consider other options, since your offer will probably come in at the same time as several others. If you like a place, you’ll need to move fast, but be sure to keep your head on straight.
In the midst of a bidding war, logic can quickly go out the window, replaced by a desire to ‘win’ at all costs. That’s called game theory in economics; another name for it is the “winner’s curse.” Buying more home than you can afford, or removing important conditions like a home inspection, are actions that might secure your new property but be highly regrettable later. Even when time is a factor, it’s important to think hard before you act.
Your Realtor has his finger on the pulse of the market, and knows what sellers are expecting right now; he can help steer you to success without compromising your family’s financial well being. Listen to this expert, and heed his advice – make sure when a seller accepts your offer, it’s a reason for celebration and not a Pyrrhic victory.
