How do bidding wars work in real estate?

Real Estate Agent

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… 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.

Comments (3)

Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

"Bidding War Law" that's a new one for me Sam Marji , there may be ethical issues that crop up in the process however we've been successful keeping the legislation away from a multiple offer stage. 

Jan 01, 2015 09:15 PM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

I "cut my teeth" in this business in NYC with lots of bidding wars, so they don't frighten me. We had lots of them in Charlotte this past year and many of my listings received multiple offers. The problem I find is that too many agents don't have experience with multiple offers and really don't understand how to properly counsel their clients--be they sellers or buyers.

Jan 01, 2015 09:20 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

In Denver we had serious bidding wars this past year, and it is in the best interest of the Seller.    They hired you to get the highest and best offer.   Listing agents have to be careful and keep the Seller informed about the appraisal process. 

Jan 01, 2015 10:25 PM