Today’s show is called 52 offers. You might be thinking that the number 52 relates to a deck of cards. Not in this case. On today’s show we’re talking about a property that this past weekend had 96 showings and today had 52 offers. Mine was one of them.

I was certain there would be multiple offers and we knew the property would sell above asking price. We did our due diligence, a thorough job of estimating the work.

The house was a total mess but salvageable. There was a gaping hole in the roof. The house had been left to fall apart. The mess on the inside had the makings of a horror film.

Amidst all the clutter, garbage and debris, there were items in near perfect condition. The had to be at least $10,000 worth of tools and equipment that could be sold on the open market. It’s a sad story. The owners are sick. One is in hospital and there is a power of attorney to oversee the sale.

So the question is how to read the market? Our offer price would be influenced heavily by what the finished product would sell for in that location.

The asking price was about 45% of the after repair value. Clearly there was a fair bit of room to do a quality job of the renovations. The structure of the house had been damaged in a few places due to the intrusion of water. But these problem areas were localized. The entire house would be gutted and refinished.

The hot market conditions means that there were only 4 houses on the market in the same area of the city. Interest rates are at historic lows and the cost of renovating this house compared with the cost of building a new house in the city made this a compelling project.

We normally don’t go after flip opportunities. They’re labour intensive for the return on investment. But this one seemed compelling if we could get it at a fair price.

With 52 offers, there was a good chance we would not be the winning bidder. Someone is almost always willing to pay too much.

That’s the auction environment. As it turns out we did not submit the winning bid. On one level, I’m happy that we didn’t win. If we did, it meant that we were probably paying too much.

We offered $63,000 above the asking price. We knew offers would be above asking and that by itself would not be a huge differentiator unless we offered a crazy high number. We offered to buy the property on an as-is, where-is basis. There were no conditions to the offer. That too would not be a differentiator. We expected the other offers to be unconditional.

Our bid contained two items that were designed to differentiate from the other bids that might have made a difference amongst bids.

The experience of this bidding war says a number of things about the market. It says that despite the depressed economic conditions, there is an intense level of competition in the local market. It will be hard for something appearing on the public MLS to ever be a bargain with that level of competition. There are simply too many people searching for too few opportunities.

Generally speaking, we don’t bid on single family homes. Our projects are overwhelmingly multi-family. But every now and then we will look at single family opportunities when the market conditions seem to point toward the conditions being favorable. This is one of those times when property values have increased more than 20% in some local segments in under a year.

The only meaningful way to redevelop a property in today’s environment is to find opportunities that are off-market, or to build new construction. But new construction homes won’t complete for close to a year once the permitting process and the design process is complete. The market conditions could change dramatically in that time. We could see a further reduction in inventory, or perhaps we could see many properties come on the market.

We’re prepared to wait and stick to the discipline of our numbers