Hot market forces investors to go beyond ‘over-asking’

Business is far from usual for investors in many of Canada’s hottest real estate markets, as bidding wars up the ante, and financing and inspection conditions are done away with.

“In the last month I have seen a dramatic shift in buyer behaviour – they see, they want, they make an aggressive move to possess,” said Paolo Divitantonio, investment real estate sales representative at Harbour Properties in Hamilton, Ont.

“What makes it all the more interesting and challenging at the same time is that paying asking price is often a notion of the past. I have personally seen $20,000, $30,000 and $80,000 over asking.”

Divitantonio has been involved in 10 bidding wars in Hamilton in the past month. Meanwhile, Don Vogel, an investor and founder of Gangway Property Corporation, lost two properties in 2014 due to multiple bidding scenarios in another hot market, Barrie, Ont.

“In those houses, I was never comfortable waiving an inspection condition,” he added.

But more and more investors are finding they have no choice but to drop these conditions in order to remain competitive in hot markets where paying the actual asking price is a thing of the past.

“Two and a half years ago, buyers like me could take a bit of time contemplating our offers, we could bid slightly lower than asking, include reasonable conditions and we didn't have to worry too much about facing many competitors,” said Gillian Irving, an investor and founder of InvestInStudentRentals.com.

“Well, those days are certainly behind us. Not only are multiple offers the norm, but many investors anxious to cash-in on the strong market conditions are taking bold steps and presenting above-asking offers without any financing or inspection conditions at all.”

One investor in Hamilton, Ont., lost out on a house after a competitor put in an “open offer,” meaning the sellers could essentially sell the house for whatever price they chose.

“Now that is what I call a hot market,” added Irving. “My advice for investors contemplating buying in this market is to roll up your sleeves and prepare for some pretty steep competition.

“And you better have your financing approved in advance if you want to be able to even throw your hat in the ring.”