Bidding Wars Still A Fact Of Life In Real Estate Market

Posted by Alan Zunec on Thursday, April 25th, 2013 at 1:46pm.

It seems that in some markets across Canada, bidding wars are still going strong in investment real estate. During the real estate boom sellers were using an under pricing gambit that is still working, despite the slow down in that market.

Toronto is seeing the burnt of this competitive pricing strategy, all to stir up competition, with 25 percent of their properties being underpriced. Vancouver came in second at 17 percent while Calgary took third place with its 12 percent. Nationwide, BMO’s Home Buying Report noted that some 15 percent of property owners would lowball prices just to generate a bidding war.

BMO does concede that those estimates are lower than the same time period in 2012. During that boom year sellers were employing that strategy in record numbers. It is risky because you’re never guaranteed a bidding war. But if a seller can get two buyers to go against each other it is possible to get a much higher price for a property.

You would think in a softer market that strategy would disappear, but that is not the case. In the multi-family market, where there is less available inventory, under pricing is alive and well. As long as vacancy rates remain low, as they are now, this will most likely be the case.

As far as Toronto goes, there are a number of sellers that have tri-plexes and four-plexes that are using under pricing quite effectively. This makes life a little more interesting, and usually more expensive, for the buyers.

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