Real Estate Bidding Wars: The Winning Formula Exposed (and how to be victorious!)

YES, you read that correctly; I have developed a formula that will grant you the ultimate advantage when buying a home in London’s volatile real estate market, and I am going to share it with you in this two part article, for FREE!

Why am I sharing this secret? The answer is simple; your home-succulent success is my business, and it is too delicious not to share.

PART 1: WHY ARE HOME PRICES SO HIGH?
To fully appreciate my avant-garde winning formula, it is important to understand how our real estate market became so “CRAZY” in the first place.

THE HOUSING AFFORDABILITY TASK FORCE REPORT (sounds authoritative, doesn’t it?)
Earlier last month the Ontario Government released a cute little report highlighting three topics I have been discussing for many moons:

1. Population growth
2. The housing shortage in Ontario
3. The impact naysayers have on new construction

POPULATION GROWTH
According to Stats Canada, London is now the fastest growing community in the country. London proper has reached a population of 422,324 and the London area is now at 543,551 (I can’t help but wonder if these numbers are still low? After all, being a Londoner is accepting that our population will always be an unsolved mystery).

HOUSING SHORTAGE
According to a Scotiabank study, Canada has the fewest housing units per population of any G7 country and two-thirds of Canada’s housing shortage is in Ontario. Canada must build 1.5 million homes over the next 10 years to address the supply shortage and there are not enough skilled professionals to fulfill this need. (The London shortage is so dire that you can no longer buy a detached home for under $400k).

NIMBY NAYSAYERS
According to city officials across Ontario, NIMBY-ism (not in my backyard) has gone BANANAs (Build Absolutely Nothing Anywhere Near Anything). London has been living with decades of NIMBY-ism thanks to our friendly neighbourhood naysayers. This has resulted in the deterrence, delay, and escalation of building costs for new homes.

WHY IS IT IMPORTANT TO UNDERSTAND OUR “CRAZY” MARKET?
Purchasing a home in 2022 has become nothing more than an exorbitant multiple-offer orgy party, and whether you come out on top or finish on the bottom, one thing is for sure, you will experience an array of provocative emotions (#$ex$ells) So, before a buyer gets all “hot and heavy” with my alluring formula, it is crucial that they understand:

• They are at the mercy of today’s real estate market.
• They have little room for negotiation and must give in to the seller’s demands.
• They will need to take calculated risks beyond their comfort zone.
• They will be maxing out their purchase power to buy a home.

*Refer to my article ‘The 7 Stages of Homebuyer’s Grief’ to help achieve this mindset (posted November 8, 2021).

PART 2 PREQUEL: COMPARISON SALES
Before entering a bidding war and swan-diving right into the winning formula, we should first utilize recent sales of similar properties. If you can find a comparable property in the neighbourhood within the last 14 days, increase that sale price by 2.5%, add a little $10,000 bonus on top and SPLASH! You will have an excellent chance of being proclaimed the bathing beauty of that sea cave.

But what happens if there are no comparable sales? Well, this is where we will implement my winning formula and separate the duds from the stud.

Enough foreplay, let’s get to the formula!

PART 2: THE WINNING FORMULA
For this exercise we will focus on residential freehold properties, sourcing our information from the 2022 Ontario Collective MLS.

STEP 1: CALCULATE THE DIFFERENCE
1. Find the average price of Guelph, Kitchener, Waterloo and Cambridge (GKWC) from the last 3 weeks.
2. Find the average price of London-St. Thomas (LSTAR) from the last 3 weeks.
3. Divide the GKWC average price from the LSTAR average price from one week in advance to find the difference in price.

Formula: GKWC Avg. Price (Last Week) ÷ LSTAR Avg. Price (This Week) = The Difference

Example:
$1,087,684 (Jan 25-31) ÷ $858,519 (1-7) = 1.27
$1,101,011 (Feb 1-7) ÷ $864,006 (Feb 8-14) = 1.26
$1,123,286 (Feb 8-14) ÷ $881,095 (Feb 15-21) = 1.25
$1,134,026 (Feb 15-21) ÷ $916,409 Feb 22-28 = 1.24

STEP 2: PREDICT LONDON’S AVERAGE SALE PRICE
Divide the GKWC average price from 1 week ago by the difference from 1 week ago. It won’t be exact, but the prediction will be fairly close.

Formula: GKWC Avg. Price (Last Week) ÷ Difference (Last Week) = LSTAR Predicted Price (This Week)

Example:
Predict the week of February 8-14:
$1,101,011 (Feb 1-7) ÷ 1.27 (Feb 1-7) = $866,938
Actual LSTAR Average Price (Feb 8-14) = $864,006

Predict the week of February 15-21:
$1,123,286 (Feb 8-14) ÷ 1.26 (Feb 8-14) = $891,478
Actual LSTAR Average Price (Feb 15-21) = $881,095

Predict the week of February 22-28:
$1,134,026 (Feb 15-21) ÷ 1.25 (Feb 15-21) = $907,221
Actual LSTAR Average Price (Feb 22-28) = $916,537

STEP 3: THE HOME FACTOR SCALE
Now that we have our predicted sale price, let’s examine the property we will be bidding on. Remember, not all homes are created equal, so we will use my efficient ‘Home Factor Scale’ to help predict the true market value of your new potential dwelling.

Factors Include:
1. Zone
2. Number of Bedrooms
3. Number of Bathrooms
4. Garage
5. Type of Freehold (Semi-Detached or Detached)
6. Renovations
7. Extra Factors

Example:
We are bidding on a 3 bed, 2 bath, fully renovated home with a single car garage in the South Zone for the week of February 22-28.

Solution: Select answers that apply,

ZONE
London North = +$50k
St. Thomas = +$0k
London South = -$30k
London East = -$150k
Example = -$30k

NUMBER OF BEDROOMS
4+ Bed = +$0k
3 Bed = -$170k
2 Bed = -$300k
Example = -$170k

NUMBER OF BATHROOMS
4 Bath = +$200k
3 Bath = +$150k
2 Bath = +$0k
1 Bath = -$300k
Example = +$0K

GARAGE
No Garage = +$0k
Single Garage = +$0k
Double Garage = +$115k
Triple Garage = +$700k
Example = +$0k

TYPE OF FREEHOLD
Detached = +$20k
Semi-Detached = -$200k
Example = +$20k

RENOVATIONS
Fully Renovated Modern Home = +$200k
Renovated Modern Kitchen Only = +$50k
Outdated Décor = +$0k
Unliveable Renovator’s Delight = -$200k
Example = +$200k

EXTRA FACTORS
Granny Suite = +$70k
Separate Entrance = +$30k
Tenant Occupied Mid Lease = -$75k
Bad Odour = -$75k
Example = +$0k

TOTAL = +$50K

STEP 4: CALCULATE FINAL PURCHASE PRICE

Formula: Predicted Avg. Price + Home Factor Scale Total Value = Final Purchase Price

Example:
$907,221 (Feb 22-28) + $50k = $957,221

SUMMARY
By examining cities along the 400 series highway between London and Toronto, we can help predict the Forest City’s real estate future. Despite what the listing price says on a property and/or how many multiple-offers are registered, predicting the market value of a home is the solution to vanquishing a multiple-offer situation bidding war.

OFTEN IMITATED, NEVER DUPLICATED
When you’re ready to gain the ultimate edge on your next real estate escapade, you know whom to call!