By now you’ve heard about the wild, buyer free-for-all that is the Toronto real estate market. The number of buyers looking to make a move combined with a shortage of lucrative inventory has created a sellers’ market to end all sellers’ markets. We’re starting to see multiple offer situations on Toronto condos again, a trend not seen in recent years as condo supply reached some record highs.

Chances are you may have seen other stories about multiple offers, but none compare to this one from last week that saw a house in the Yonge & Lawrence area, listed at $699,900, sell for $1,366,000 with 72 offers. SEVENTY-TWO.

I have no idea how this happens. At offer number 10, your odds as a buyer are incredibly slim, to the point that you probably shouldn’t bother. But hey, there’s a chance right? Apparently then, another 62 people proceeded not to care much for the odds either.

Naturally, there were likely a ton of offers in there that were just doing the sellers a favour by boosting the quantity of competition, without being a real threat to the serious buyers. The offers that included sale of property, financing, or insurance conditions would fall into that category. So would anything around asking price. Regardless though, they were there, and on every other bidder’s mind when it came to formulating an offer price.

In competition, the cleaner an offer is, the more lucrative the offer, as oftentimes conditions can be as important as price. When there are 72 offers to choose from, the seller isn’t going to accept a condition that forces them to wait for a house in a less sought after to sell. They’re taking the sure thing.

By far the biggest challenge buyers face in multiple offer scenarios is the blind bidding process. This will always garner the optimal result for the seller and will leave at least one bidder with a bad taste in their mouth, and hopefully that’s if they lose. In the story above, I’m sure all 72 will end up with some degree of animosity. From the guy who bid $675k conditional on the sale of his place in Georgetown; to the woman with the second best offer who lost by a few grand; to the winners who’ll look back at the $1.1M house they just paid an extra $260k for, and who will then be putting another few hundred thousand into fixing it up; they all lose. Working in their sellers’ best interest, listing agents don’t disclose any terms of the competing offers to the buyer agents, which forces buyers to put their best foot forward right off the bat. The best case for the buyer in multiples is that they get a house they love for what it’s worth. With 72 offers, that’s not happening.

Congrats to the listing agent for drumming up that many offers and doing their seller client a huge favour. At the same time, buyers and their agents need to do a better job of knowing what market value on a house like that is. Ultimately, list price doesn’t mean a thing. Only people who are willing to pay what a house is worth should be offering, and I’m willing to bet that 80% of those offers were nowhere close. As Toronto Realtor David Fleming (@TORealtyBlog, a solid twitter follow) was quoted saying, “we’re in a hot market, but no house is hot enough to get 72 offers”.

Fortunately, most of you aren’t buying in Toronto and will probably never encounter such an absurd scenario. There is a chance though, depending on location and market conditions, that you could find yourself in competition with a few other buyers. Let’s take a look at that process and what you can do to win out, or at least feel good about walking away.

As a buyer, you really need to weigh your interest in a property before committing to a multiple-offer situation in an attempt to buy a property. If you really love the house, chances are you’ll find a way to come up with a few thousand dollars if you need it. Because of the competitive nature of things though, it’s important not to get caught up in winning but rather ensuring you still like the house you buy at the end of the day.

When sellers receive multiple offers to purchase they basically have 4 options:

1. Accept the best offer
2. Send any number of the offers back for buyers to try again
3. Counter-offer on the best offer
4. Work with none of the offers

Number 4 is pretty rare. After all, as a seller, if you go routes 2 or 3, you’re not committing to any of the offers either, but it’s much better to work with an offer you have in front of you than to wait and hope a few more materialize. Your first offer is usually your best offer, so if you can pit more than one buyer against each other, you’re crazy not to.

With option 3, if a seller counters your offer, it gives you a sliver of leverage since you know that there are no other offers in play at the moment, and that the seller has lost their competitive scenario. However, you know that those offers could come back in at any time if you don’t accept the sellers’ counter offer. The seller is basically telling you that your offer was the best, and may be making a change to the closing date or a condition that’s simply there for you to accept and win the battle.

Leverage as a seller is paramount. I’ve offered with clients in a multiple-offer scenario which we lost, but when the other offer fell through, we went back in $5,000 lower than our original offer knowing that we had no competition. My clients ultimately got the house for $3,000 less than their original offer. If you’re a seller, you better make damn sure the counter is going to be accepted if you choose to go with option 3.

If the sellers send you and others back to submit a new offer, it’s for one of two reasons: Either none of the offers were acceptable OR multiple offers were very close to each other and the seller thinks they can get higher bids back from one or more to put them over the top. It’s a bit of a slap in the face and maybe a tad greedy, but if the seller thinks that buyers’ interest outweighs the offense, it’s a seller-friendly strategy that they can employ.

As a buyer, number 1 is the easiest to navigate if you win, but sometimes hard to swallow if you don’t. Eventually your agent is going to find out what it sold for (potentially right away if the winning offer is condition-free) and the worst thing that can happen is your agent giving you the sale price and it being something you would’ve been willing to pay. There you’re back to square one. Two of my listings have sold with multiple offers in the last 2 weeks, and the phone calls to the losers in the bidding process are usually tough ones to make. Let’s make sure that phone call doesn’t happen.

Multiple-offers can be a sticky situation as a buyer, so make sure you’ve got an agent who’s been there before and can help you strategize to achieve the best outcome for you. You’ll be glad you did.