Is there a relationship between “holding offers” and house prices?

“Holding offers” is a selling strategy when a seller sets a fixed date to receive and review offers from interested buyers.

We explored the prevalence of this practice in the Hamilton census metropolitan area from January 2012 to June 2022. We were interested in finding out if there was a relationship between house prices and using the holding offers selling strategy.

Producing this report is part of our commitment to address housing data and knowledge gaps and to help Canadians make better-informed decisions. The findings from this study are helpful to a wide audience of readers, especially those interested in housing supply-demand dynamics and potential barriers to affordability.

Download the Housing Market Insight

Holding offers linked to sellers’ markets

Our analysis found that, in the previous decade, holding offers were most often used during 2 seller’s markets. These were from March 2016 to May 2017 and July 2020 to March 2022. During these times, the resale market had less than 1.5 months of inventory. In addition, average prices grew by double digits on a year-over-year basis.

A deeper look at the period from January 2021 to June 2022 revealed that homes sold with offer dates had a list price per square foot that was 7% lower than homes sold without offer dates. Over the same period, the estimated net gain to sellers who used this strategy was an additional 3% on a price-per-square-foot basis compared to sellers who did not.

During recent seller’s markets, homes with offer dates likely attracted more buyers compared to homes sold without offer dates because they were under-listed. Setting a lower list price in a highly competitive market with rising prices, may drive additional traffic to, and offers on, these properties. This is done by reducing the perceived barrier to entry for many prospective buyers.

Fewer sellers use holding offers in cooler markets

When market conditions in Hamilton shifted during the second quarter of 2022 and the market became better supplied, fewer sellers were holding offers. The listing strategy was also no longer associated with higher selling prices. About 25% of listings with an offer date were cancelled during this period.

This shows that the holding offers selling strategy is dependent on a deeply undersupplied housing market. In all periods over the previous decade when the resale market had enough supply, the holding offers strategy was hardly used. During these times, typically fewer than 5% of monthly sales used it.

Holding offers strategy doesn’t influence prices in balanced markets

Our research demonstrated that strong seller’s market conditions were necessary for holding offers to become the most prevalent selling strategy and for it to be associated with price gains.

We also discovered that when the market was in greater balance, holding offers didn’t result in a price advantage to sellers. The strategy was used less often in balanced markets. This highlights the reliance of this listing strategy on a deeply undersupplied housing market.

Our study emphasizes the need for governments, the housing industry and private corporations to act to meaningfully bolster supply. Increasing housing supply is critical to achieving affordability, per our report on Canada’s Housing Supply Shortages: Estimating what is needed to solve Canada’s housing affordability crisis by 2030.

Get notified when new reports are released. Subscribe to our Housing Research Newsletter.