This is a question coming up from our real estate coaching clients a lot in both Toronto and Vancouver so I thought we would address it for everyone.
Offer too little and poof – the house is sold to someone else. Offer too much and your client is left with this feeling of dread they overpaid. It’s a tough one to win.
It’s difficult to establish the market value because if there are several offers then there is more demand than supply and basic economics tell us this will drive prices up. How much and how fast depends on a large number of variables including the supply and demand ratio, the desperation of the other bidders, the uniqueness of the property, the sales ability of the other real estate agents, the macroeconomic picture and many other nuanced influencers.
Over the years, many real estate trainers have tried to establish a formula that could help their clients win more multiple offers. None of them have ever worked because they are tied to the asking price and the asking price is merely a strategic anchor for the seller and is meant to advantage the seller.
To win in multiple offers, you need to ignore the asking price. And, you need to get your client to ignore the asking price. Tell them to imagine the property is listed for $1. It’s an auction and you need to establish what the top price they will pay is and feel good about the purchase. You become a real estate coach to your client.
The next step is to look at the definition of market value with your client.
One could argue multiple offers create conditions not requisite to a fair sale and the price may be affected by undue influence. But if multiple offers are common in your marketplace then the definition stands. Albeit – it’s a warning to tread carefully for sure.
Typically when we estimate the value of a home, we look back to what similar properties sold for in the recent past. While this information is still valuable, when the demand surges much higher than the supply, we need to give this information less weight and we need to gather information on other important factors. What is the situation of the other bidders? How aggressive are the other agents? What will their perceived value of the property be? What is the likelihood of other similar properties coming on the market in the near future? How unique is the property?
In a strong sellers’ market, the value is what a buyer will pay. You need to get excellent at estimating what the other bidders will bid if you want to get your client a great home.
Being excellent at selling real estate involves thousands of important nuances and this is why top performing agents know real estate coaching is highly valuable. If you want to be a successful real estate agent, coaching is not a luxury – it’s essential.