What are My Options in a
Real Estate Bidding War?

As a Buyer, when should I walk away from a bidding war?

As a seller, how can I handle a multiple offers situation?

The intent of this information is primarily targeted to buyers. But sellers will appreciate the strategy below also. It'll provide you with a different perspective, and help you decide whether it's the most effective marketing method for your particular situation.

When buying a home, in an ideal world, you're the only bidder on your dream home. But unless all the planets are aligned in your favour, and you're in a balanced or buyer's real estate market, you may find yourself in the unenviable position of having to compete with another buyer who shares your ideals of what constitutes a dream home. If you ever find yourself involved in a multiple bids scenario on the same home, here are a few suggestions.

In these competing bids situations, it's really easy to get carried away in the excitement of the moment - not necessarily the wisest thing to do from an investment perspective. I suggest you leave spontaneous shopping to the clothing store. When a ...

Feeding Frenzy

... occurs as a result of multiple offers, the property may easily sell for well over the asking price, sometimes at unrealistically high levels. If your emotions get the better of you, you may ultimately buy your beautiful home, but at a price in excess of what it's realistically worth, at least from an appraiser's perspective. And if your lender thinks you were too generous to the seller, you better hope you have a large enough cash reserve for a bigger down payment because they may not advance sufficient mortgage funds to allow you to fulfill your agreement of purchase and sale. So, be wary.

In certain real estate markets, and when demand exceeds supply, or for a highly desirable property, a common marketing strategy used by some REALTORS®, to maximize a sale price for their seller client, is to deliberately instigate bidding wars. They list a qualified property at a price below what they perceive to be fair market value.

As part of this bidding war strategy, they delay the presentation of any offers for a short period of time in order to allow all interested prospective buyers and their REALTORS® an opportunity to discover and view the listing. This usually works great for sellers and their agents, but it can be a frustrating ordeal for all the buyers.

In a bidding war, the terms of all the other offers are kept confidential between the seller, their REALTOR®, and each individual buyer and their REALTOR®. In other words, it's a ...

Blind Bid

All offers are usually presented separately, but in one session, and normally in the same order as they were registered with the listing brokerage. The wisest procedure is for the seller's agent to provide each buyer REALTOR® with the opportunity to participate in the presentation of their client's offer. Questions can be asked of the buyer agent regarding the offer in order to provide valuable information so the seller can fairly compare and make a decision between the multiple bids.

After an individual presentation, the buyer agent is asked to leave the presentation room, with the listing REALTOR® retaining one copy of the offer. Each buyer REALTOR® is permitted the same opportunity. This continues until all the competing bids have been presented.

Then, with the guidance of the listing agent, with a copy of each of the competing bids spread before them, the seller makes a decision. Typically, but not always, the seller will be advised to return all offers to the respective agents with the suggestion that they ask their buyers to ...

Improve Their Offers

So, they're given a second chance. When all offers are re-registered, the entire process begins again. After consultation with their REALTOR®, the seller usually accepts what they perceive to be the best offer.

Aside from increasing the offer price, there are other ...

Options Available to a Buyer

... to make their offer more attractive to a seller. If a buyer is comfortable with doing so, conditions may be removed from their offer, a closing date could be altered to comply with a seller's preference, chattels could be excluded, seller requirements could be eliminated, or deposits could be increased. Usually, though, it comes down to ...

Conditions and Price

Sometimes, the seller may simply reject those offers that are not in the top running, and work with only the top few. A seller may retain some offers, provided the irrevocable dates allow it, and counter offer to that buyer. If that buyer accepts that seller offer, the deal is done. If not, the seller may counter the next one, being careful of irrevocable dates and times so as to avoid the possibility of committing to more than one buyer. A seller will usually continue this process until one is accepted by a buyer.

Some buyers simply avoid a bidding war completely, which isn't necessarily the best idea. They may be missing out on acquiring a wonderful home. I suggest that under such circumstances, you decide on your maximum affordable price, one that's not ridiculously over what your agent feels is market value, and simply stick to it.

Don't budge

What have you got to lose?

So, when you're participating in a multiple offers scenario, that results in a bidding war for a home, resist the temptation to join the frenzy, and move on if you lose the bid. Bidding wars can be an emotionally challenging time. And if you don't have the stamina, walk away. There'll be another home somewhere sometime that you'll like.

And if you're a seller, and you and your REALTOR® feel that market conditions are right, then go fo it. All you need is the right property, the right market, nerves of steel, and a trusting relationship with your REALTOR®.

If you're interested in learning more about buying a home, or you've been successful in a bidding war, click here. It's a great source of valuable home buying information.

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