Bidding wars have been part of the Real Estate Industry for some time. Bidding wars have been around even when interest rates were double then what they are today. If you are the kind of Buyer, who likes buying real estate which is in “ready to move in” condition and in high demand neighbourhoods, you would typically be subjected to bidding wars.
Most Common Reasons for Bidding Wars are as below:
1. Property is Priced Lower then Market Value.
2. It is a product which at that given point is too much in demand.
3. Market is very hot.
4. Seller decides to hold back on accepting offer till a certain day.
5. Property is presented very well.
6. Lending criteria’s are about to change not favouring buyers.
How do bidding wars work? According to the law, in a bidding war, the listing agent must tell all buyer agents, how many offers have been registered for the subject property. But the listing agent is not allowed to give out the buyer names or say how much they are bidding.
Most of the times buyer’s agent calls the seller’s agent and tell him/her that they plan to bring in a formal offer later that day and may even call their office and register the offer. But that doesn’t guarantee anything, as prospective buyers may change their mind last minute. What this means is that the seller may get a handful of these so-called “registered offers” during the day with no guarantee any will be actually presented in the offer presentation scheduled later that day.
Most of the times Home Buyers feel that a seller shouldn’t have any right to look at multiple offers. But let me ask you a question here, if you were the Seller instead, wouldn’t you want to sell your home to the party who wanted to pay you the most for it? Houses are personal – it’s not like buying a car, where there are thousands of the similar type products out there. How much a house is worth to someone is dependent on their personal motivations. It can even work many times to Buyer’s advantage i.e. there was not a single offer on the table or may be just 1 offer from Buyer who understands the dynamics of this process and being alone…..now wants to negotiate it down.
At this stage, what if you loved this subject property and decided not to bid for the same just because it was prevalent in your mind “multiple offers mean…..out of your control and I have to pay far over asking” where as situation may turn out to be totally different.
On few occasions, I have been able to negotiate lower then asking in a multiple offer situation. So there is no thumb rule of the outcome. It is all dependent on the motivation of the parties involved. No one involved will know what offer price those motivations will result in, till the end of this process. So never be scared to participate. If you have hired a Experienced and Qualified Real Estate Representative, his/her experience will help you take a more informed decision and help you through this process.
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