Selling over the asking price: how to prepare, negotiate and decide

In a market saturated with buyers and not enough properties for sale, sellers are in a position of power. If their type of property is in high demand, they can expect to receive multiple offers to purchase in a short amount of time.

The real estate market is constantly changing. To find out where it stands today, discover our latest analyses in the Real Estate Minute.

Summary:

• What is real estate overbidding?
• Is overbidding illegal?
• Which regions are most affected?
• Preparing: setting a date to receive offers
• Agree on a response deadline
• Negotiation: ask for a better offer
• Decision: choose the offer that makes you happy

What is real estate overbidding?

Real estate overbidding occurs when a buyer offers a higher price than the asking price for a property, usually in situations where demand exceeds supply.

The process begins when a buyer submits an initial offer on a property. If other buyers are interested, they may offer higher amounts to surpass the initial offer. This dynamic can be repeated several times, with each participant trying to offer the highest possible price and terms that best suit the selling party.

Overbidding can result in a final price well above the estimated value of the property, which can be beneficial for the selling party, but costly for the buyers. Increased competition can also lead some people to make impulsive offers or exceed their initial budget, in addition to feeling significant emotional pressure.

Factors influencing overbidding include strong market demand or unique property features. 

Is overbidding illegal?

Overbidding is generally not illegal, but it must comply with local laws and regulations. The process must be transparent and honest, to avoid manipulation or deception.

Overbidding practices must comply with current laws governing the conduct of auctions and the presentation of bids. Certain unfair practices, such as manipulating bids or creating a false impression of competition, are illegal and may be punishable by law.

Which regions are most affected?

In Quebec, real estate bidding is particularly pronounced in certain regions where demand is high and supply limited. Montreal is one area that is constantly affected, particularly in its central and popular neighborhoods such as Plateau-Mont-Royal and Mile-End, where competition for residential properties is intense¹. Laval is also feeling the effects of overbidding, particularly in areas under development or close to transportation¹.

Quebec City, with its historic and attractive neighborhoods, is also experiencing overbidding, where sought-after properties can see their prices rise considerably². In the Montérégie region, cities such as Longueuil and Brossard regularly see increased demand, which can lead to overbidding³. Finally, Gatineau, in the Outaouais region, usually benefits from its proximity to Ottawa, which also contributes to overbidding on the real estate market⁴.

Preparing: setting a date to receive offers

Since you don't have any control over what buyers will be willing to pay for your property, the goal is still to set a fair and realistic asking price. This will help you attract serious buyers who are looking for your type of property.

As soon as you put your property on the market, you will have an idea of the interest in your product. For example, you might quickly receive several requests to visit. Different strategies can then be applied.

You could inform those interested that you are accepting offers to purchase until a certain date and that you will not be making any decisions until then. You could also wait to receive a first offer and then ask those who have expressed interest if they want to make one, too, letting them know when you will be making your decision.

Agree on a response deadline

The first rule when you receive an offer to purchase—one that applies at all times—is to agree on a response time with the buyer. It may be preferable not to immediately accept an offer, either verbally or in writing. Some reflection time will allow you to consider the offer or compare all the offers made.

“You can take advantage of this time to contact one of our notaries⁵ or a notary in private practice, who will answer your questions about the contract's different clauses. This step will help you conclude the transaction with complete peace of mind,” advises Elena Maria Bejan, notary at DuProprio.

Negotiation: ask for a better offer

As long as you have not accepted an offer, you can ask each of the contenders if they want to increase their offer. All the terms can be changed: the price, the conditions, the closing date and the occupation date. If the buyers are not already offering more than asking, this could tip the scales.

In this respect, it is in your best interest to ask potential buyers for a letter stating that they have been prequalified for a mortgage. It proves that they will be able to pay the amount you are asking (or more, if overbidding).

Decision: choose the offer that makes you happy

All you will have left to do is choose the offer that meets your needs, if there is one, and to give your buyer the good news. You can then inform the non-selected buyers of your decision. Since sales don’t always go according to plan, ask them if they want to be informed if the accepted offer should fall through at any point.

Finally, if you accept an offer to purchase that has been raised, keep verbal or written proof of the changes made. The initial offer and this proof of increase will form a single contract. Otherwise, it is possible to fill out a new form containing all the terms of this new agreement.

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