What is the deal with all of these multiple offers?

What’s going on with multiple offers in the Greater Edmonton Area actually isn’t isolated to just us — It’s North America-Wide and it’s an effect of COVID.
When you take a look at what is happening with the average family and what is driving them to want to move—it's pain points.
The reason they originally bought their house is changed. Typically, we buy our houses to live out of, but with the recent pandemic, we are forced to live inside of them.

So, what do you do about all of these pain points?

Turns out most people have a budget because all the money that they used to spend on travel and entertainment has suddenly become available to them. So, they are solving these pain points by way of using real estate, and it has created a lot of demand.
So, we can understand why it's popular, but why is demand overtaking supply in a market that hasn’t been known for that over the last few years?
It means that there are many Edmontonians that are still cautious about having strangers in their home given COVID, and they wouldn’t be comfortable to host showings, so they are staying off the market.

If we look over the last few years, what we see is when you brought a property to the market, there was normally only one buyer to every two sellers. That meant that you kinda had a fifty-fifty shot if you look at it statistically. And how well you executed ended up securing your outcome.
The more information people have, the more they are able to adapt to the market. It is not realistic to assume that most people would know how to participate or win, having come from the outside where they didn’t pay a lot of attention. But, once they do, over that sixty day period, they tend to make some price changes, almost like acclimating to the market, and then the sold sticker goes up.
Over the last five years, you’d be safe to say that it there was about a 2-3% discount from list price to sale price, whereas that is not desirable among common properties right now.
With this shift, when a property comes to the market right now, and really if it’s a well-represented property, that's a good example of real estate, and it's a single-family detached house between 400 and 550 there is a fair chance we will see more than one offer at once.

How does that happen?

Let's go through the timeline. Normally a property is listed, and the moment it gets listed, it goes live on the MLS system, which is how it gets out onto realtor.ca. This is referred to as day zero.
On day zero, every agent is notified, and agents can set up criteria searches on our pro tools called Paragon, for their buyers so that they know immediately when a property is listed.
Often, depending on what time of day that property is listed, they may even have day zero showings. Which has historically not been as common, but that could end up with one showing being excited about the property and deciding to take action by writing an offer.
Just as the listing agent receives that offer, it turns out that the showing right before them, or right after them, has also had time to discuss, and now they are presenting an offer.
The agent takes this over to their seller, and they should give them great advice. Which would include the option to go into multiple offer process, by disclosing to those buyer parties that there are multiple offers. Or, they can also choose to negotiate with them independently without disclosing the existence of an offer.
You can kinda see how the trap is designed, and it is actually designed to protect consumers. If you were to negotiate with them independently but tried to play one against the other, you could then end up disclosing the offer, and suddenly you have to go into a multiple offer process which is designed to be transparent to a point. This way, you get to know how many people you are competing with, you know that agents of the people you are competing with, but you don't necessarily get to know their offer.
And, the seller can only accept one offer, they can decline all the offers, or they can also counter one offer., which means they have to let everyone else go so it keeps it from playing one against the other.
We hear the term "bidding war," but it is more like a silent auction, where everything is put forth, but you don't get to see what other people are offering.
It is a little bit different than what most people might expect. And then, out of that, the sellers get to choose an offer.

A lot of people would think it is only price, but there are other factors to an offer that can play.

Even if it was a great price, if the possession period just doesn’t work for that family that’s moving out, they will just not be in the position to accept that offer. Or, they may try and counter that offer and change the possession period.
However, if it was really close in price to another offer, they just might win on possession alone.
One of our teammates recently won because of something outside of the hard facts of the offer.

Well, then how do you make a decision?

Imagine a situation where the offer prices are the same, the possessions periods are the same, the deposits are the same, and all the conditions are the same.
There are a percentage of people that put in offers that are subject to financing and can't get to the finish line.
There are ways to kind of understand what's more likely or less likely, so a lot of the conversations with sellers can sometimes be about the other parts of the package. Like was there a pre-approval letter included? Was there a home inspection already set to show organization and intent to finish?
These outside factors are becoming major factors in other markets that have been hot for a long time, like Toronto and Vancouver, where they are seeing properties regularly listed at a million and selling for $1.3 million.

You actually have to do what they call "playing the game" and what is seen as pricing into traffic.

What this means is that multiple offers, if you look from a really wide angle, they are like a symptom of the problem. And the problem is that the market is moving faster than we can measure through list prices.
Buyer demand is outweighing seller supply so much that when those offers come in, they are gonna go up over list price.
There isn’t appraiser there to say, "hey, this is the top," or "this is finished." If you look deeply into economics, you will understand that the price of anything is based on what a reasonable buyer will pay.
In a situation where you have many buyers who are willing to pay above asking, who is an appraiser to argue with those types of statistics?