What Is An Exclusive Listing?
In a real estate market like Toronto’s, the dream scenario for any seller is a “Bidding War.” A bidding war (or multiple offers) is when there is more than one offer on a property. The competing buyers do just that. They “compete” to acquire the subject property.
Given Toronto’s chronic low inventory and insatiable demand for residential real estate is commonplace for a Seller to receive more than one offer on their home. Typically, when a Seller is fortunate to receive multiple offers, the Seller can often move their property at a record price. While many sellers set their sites on ultimately achieving a bidding war before going to market, many are confused about the actual offer process and how to negotiate or counteroffer in a multiple offer situation.
So, your property is on the market, and you have received multiple offers. Now what?
If you are a Seller who has received multiple offers, your agent is obliged to disclose the number of registered offers on your home to any party who has shown interest in your property.
The total offer count is the only information that the selling agent is obligated and permitted to share with interested parties. This also includes buyer agents that have already registered an offer or a considering an offer submission.
Signed offers need to be officially registered using a Form 801 submitted to the listing brokerage. The form submission legitimizes the offer and allows for full transparency related to the total offer count.
The Seller’s agent is duty-bound to present all signed offers to the property owner(s), usually at an appointed time.
1/ Reject all of the offers
2/ Accept one stand-out offer
3/ Or, negotiate
In a multiple offer scenario, as a Seller, if you put “pen to paper,” when signing back or countering on one of the offers (either digitally or in writing), you are locked in with working with that one offer. In other words, you cannot sign back or counter offer more than one offer at a time when you have received multiple offers.
If, as the Seller, there is only ONE offer on your property, countering with a sign back in writing is encouraged because tactically, you are negotiating with only one party at the table. Following me so far?
However, it becomes infinitely more complicated is when you have multiple parties at the table and there is not one stand-out winner.
As a Seller, when entertaining multiple offers, you don’t want to give up your high ground by committing to working with just one party from the get-go.
It’s to your advantage to elicit a competitive environment with multiple prospective buyers at the same time. It’s time to get strategic. It’s time to get tactical.
It is not a tactical course of action for the Seller to work with one offer by signing back or countering in writing. In other words, you’ve just lost all of your leverage.
The best course of action is to keep all of the communication between the Selling Agent and the Buyer’s Agent verbal and non-committal.
In a Seller’s market, like Toronto’s, where Sellers have most of the power, this is completely achievable.
Instead of signing back or directly countering, the Seller Agent’s best strategy is to invite Buyers with good offers to improve their client’s position and re-submit an offer in writing. This way the Seller hasn’t touched any paper. It’s the Buyer’s agent’s job to make improvements and resubmit paperwork back to the Seller’s Agent in writing.
The Seller’s agent can invite all of the agents and their buyers to improve their position or just the top submissions. This changes on a case-by-case basis.
At Fox Marin, we generally like to weed out the weak offers at this point and only work with the highest quality offers. Remember, as the Seller you’re not just considering the price. You’re also balancing the closing date, the deposit amount, any conditions and seeking error-free paperwork.
Seeing that the Seller’s agent can not disclose the contents of any of the competing offers, the multiple buyers are competing with little information. Essentially it’s a blind auction. The Buyer’s agent will only know many offers have been rejected, and how many offers have been given the opportunity to improve. In doing so, the Listing Agent is keeping all current offers in play and leveraging one against another.
Given the high stakes, no multiple offer scenarios go down the same way. Some can conclude quickly and efficiently, and others can be long and drawn out. When there are multiple parties jockeying for position (some numerous times over), it can take some time to go back and forth with various agents and their buyers. While the rules of the game are fairly basic, the strategy and approach can shift depending upon the situation at hand. The main thing to remember is that the buyer’s agent should always know the number of offers that are still in the mix and if any of the parties have improved and re-submitted their offers in writing. No other information will be (or should be) disclosed. It’s best to keep everything verbal and there is “no pen to paper” until the Seller has narrowed down the offers to the very best and the very final.
The Toronto Real Estate Market is like no other market in the world. Negotiating the sale of a property in a bidding war is an art form.
When the stakes are this high, it is imperative to have a steady and experienced hand representing you in the sale of what may be your biggest and best asset!
Of course, if you have additional questions, feedback or comments, feel free to reach out! Contact Us (We’re Nice)!
This article is written by Ralph Fox,Broker of Record and Managing Partner here at Fox Marin Associates. Ralph is a Torontonian native who recognized from an early age that the most successful people in life apply long-term thinking to their investments, relationships, and life goals. It’s this philosophy, along with his lifelong entrepreneurial drive and exceptional business instincts that help to establish Ralph as a top agent in the real estate market in downtown Toronto.