Holding offers led to $30,000 gain for Hamilton home sellers, new report shows

A new report from the Canada Mortgage and Housing Corporation (CMHC) found Hamilton home sellers made an average of $30,000 more when they held offers on their property during the peak of the local market.

The case study, released by the organization Thursday, looked at the selling strategy and how it played out in the city's housing market between January 2012 and June 2022.

Holding offers refers to when a seller sets a date in their property listing to accept and review offers - a slight variation from usual listings where offers are welcomed at any time.

Speaking to The Spectator, CMHC senior analyst Anthony Passarelli said the organization found the selling strategy was largely used during two separate periods when market conditions favoured sellers as demand far outpaced supply.

During the peak of those periods - which include March 2016 to May 2017 and July 2020 to March 2022 - nearly 74 per cent of homes in the region sold with an offer date, Passarelli noted.

Yet in all other periods when the market wasn't as hot, the strategy was scarcely used and generally only accounted for less than five per cent of monthly sales.

The strategy doesn't create the hot market," he said. But it is something that is utilized during the hot market."

Passarelli said their analysis also found homes listed with an offer date had significant" price differences compared to those listed without.

Between January 2021 and June 2022, houses with offer dates were typically listed for around $60,000 less than homes without, according to the report.

Those low prices ultimately attracted more buyers, prompting bidding wars and resulting in higher sale prices. And during that same period, those homes typically sold for three per cent more per square foot - making for an average gain of $30,000.

Ultimately, they end up selling for more, as they have more traffic and more offers than the homes listed conventionally," said Passarelli.

However, all of that began to change when the market started to cool following interest rate hikes from the Bank of Canada, he noted.

Once the city's housing market became more balanced and supply began to catch up with demand, fewer listings held offers as they were no longer associated with price gains," according to the report.

The study found that in both May and June of this year, there was no price gain attached to the strategy. Prices of homes in the region have also continued to drop month-over-month since this past March.

And during the second quarter, roughly one of every four listings in the region with an offer date was cancelled.

According to data provided to The Spectator earlier this year, the Realtors Association of Hamilton-Burlington (RAHB) saw 1,648 listings in Hamilton cancelled over a three-month period between April 21 and July 21 of this year - marking a 93.4 per cent increase from the same time last year.

Passarelli said it's likely those sellers didn't get the number of offers or price they were looking for, which led them to cancel the listing and put the home back on the market more conventionally."

That pattern underscores" how the strategy isn't always being used by sellers and that it heavily relies on a deeply undersupplied housing market - which the CMHC is calling on all level of government to address, said Passarelli.

If the housing supply is increased more, then we won't run into another situation like this again in the future, where this becomes the most common selling strategy," he added.

Fallon Hewitt is a reporter at The Spectator. fhewitt@thespec.com