When should a buyer walk away from a bidding war? How can a seller handle multiple offers?
The intent of this information is primarily targeted to buyers. But sellers may also appreciate the strategy. As a home seller, it'll provide you with a different perspective, and help you decide whether it's the most effective marketing method for your particular situation.
Have a great experience to share about a bidding war? I invite you to submit your story, article, commentary or questions about it, successful or otherwise. Click here to go directly to the submit form.
In an perfect world, when buying a home, you're the only bidder on your dream home. But unless all the planets are aligned and you're in a balanced or buyer's market, you may find yourself in the unenviable position of having to compete with another buyer (or several) who shares your ideals of what constitutes a dream home. If you ever find yourself in such a scenario, here are a few suggestions.
In the heat of the moment, it's really, really easy to get carried away - not necessarily the wisest thing to do. Leave impulse shopping for the variety store checkout counter. When a ...
... occurs, the property may easily sell for well over the asking price, sometimes at ridiculously high levels. If emotions run rampant, you may ultimately buy that beautiful home, but at a price far in excess of what it's realistically worth, at least from an appraiser's perspective. And if your lender thinks you were too generous, you'd better have sufficient cash in reserve for a bigger down payment because they may not advance enough funds to allow you to fulfill your Agreement of Purchase and Sale. So, be wary.
In certain markets, such as when demand exceeds supply, particularly for highly desirable properties, a common marketing strategy to maximize a sale price for their seller client, agents sometimes deliberately instigate a bidding war. They intentionally list a qualified property at a price below what they perceive to be its fair market value.
As part of this strategy, they list the property, but delay the presentation of offers for a short period to allow all interested buyers and their agents 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 the competing buyers.
In a bidding war, the terms of all offers are kept confidential between the seller, their agent and each individual buyer and their respective agent. In other words, it's a ...
Common protocol is for all offers to be presented separately, but in one session, and normally in the same order as they were registered with the listing brokerage. The seller's agent should allow each buyer rep to personally present their client's offer, or at least attend while it's being presented by the seller's agent. (Sadly, however, offers are now simply emailed to the listing brokerage.) By doing so, the seller's agent can question the buyer agent about their client's offer and obtain valuable information to assist the seller to fairly compare and choose wisely between the multiple bids.
After an individual presentation, the buyer agent is asked to leave the presentation room, with the listing agent retaining a copy of the offer. Each buyer agent is permitted the same opportunity and this continues until all 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, and after careful consideration, the seller makes a decision. Typically, but not always, the seller will be advised to return all offers to the respective agents with the instruction to ask their buyers to ...
Thus, everyone is sometimes given a second chance. And when all offers are
re-registered, the entire process begins again. After consultation with
the listing agent, the seller usually accepts what they perceive to be
the best offer. By the way, the best offer isn't always simply the highest offered price.
Aside from increasing the offer price, there are other ...
... to increase the attractiveness of their offer. If a buyer is comfortable with doing so, conditions may be removed from their offer, a closing date altered to comply with a seller's preference, chattels could be excluded, seller requirements eliminated or deposits increased. Usually, though, it comes down to ...
Sometimes, the seller may simply reject what they perceive to be the worst offers and work with only the top few. A seller may retain some offers, provided the irrevocable dates allow it, and counter-offer to one buyer. If that buyer accepts the seller offer, the deal is done. If not, the seller may counter the next one, being wary of irrevocable dates and times to avoid the possibility of committing to more than one buyer. A homeowner will usually continue this process until one of the seller offers is accepted by a buyer.
Some buyers simply avoid a bidding war completely, which isn't always the best idea. They may be missing out on acquiring a wonderful home. Under such circumstances, decide on a maximum affordable price, one that's not ridiculously over what your agent feels is market value, and remain steadfast.
What have you got to lose?
When participating in a multiple offers scenario - a bidding war - it's wise to resist the temptation to join the frenzy. Accept the loss and move on to another listing. Bidding wars can be an emotionally challenging time. If you lack the stamina and the willpower to control your anxiety, just walk away. Don't worry and fret. There will be another home for you somewhere sometime.
If you're a seller and you and your agent feel that market conditions are right, go for it. All you need is the right property, the right market, nerves of steel and a trusting relationship with a qualified agent.
If you're interested in learning more about buying a home and being prepared to participate in a bidding war, visit the Canada Mortgage and Housing Corporation (CMHC) website here. It's a great source of valuable home buying information.
Have you ever found your dream home and while organizing your offer, were surprised to learn that you'd be competing with another anxious buyer, or worse, several others?
Did you withdraw and with stiff upper lip, continue your search, or with a heart full of hope, bravely enter the foray and cast your bid?
Did you decide in advance how high you'd go and stick to it? Or in the heat of the moment, did all common sense abandon you? Afterward, when the dust had settled along with the excitement, did you feel you paid too much? If given the chance to do it all over again, would you do it differently? How?
Do you think you've got the best, worst, funniest or most embarrassing story to tell about it? Here's your chance to compare notes, share tips and maybe learn from other guests who've undergone a similar experience.
I invite you to submit your story, article, commentary or questions about your experience - successful or otherwise.
This support forum is not intended as an opportunity to complain. It's a chance to express yourself and hopefully help others who may be faced with a similar challenging situation. Maybe they can learn from your story. Please provide respectful remarks and advice only. Profanity, disrespectful or abusive comments will not be tolerated.
I implore you to treat this as a soft place for friendly people to land, share and learn from each other and maybe share a chuckle. I'll do my best to respond when appropriate in a supportive and encouraging manner, and answer as timely as possible any questions within the realm of my expertise.
If you're interested in delving into the real estate world and would prefer to handle bidding scenarios like a pro, check out my book The Happy Agent.
Though written for professional realty agents, buyers and sellers can
benefit from the nearly 44 years worth of real estate knowledge packed into
its pages. As a matter of fact, an entire chapter is devoted to the increasingly ubiquitous bidding war. Remember - knowledge is power.
Available virtually everywhere print and e-books are sold.
A must-read for anyone contemplating a realty career and the perfect antidote for agents seeking a more productive, less stressful direction for their own realty business.
It’s also designed as an insightful resource for home buyers and sellers curious about the ins and outs of buying and selling real estate.
"An inspiring and candid tale of one man's journey to success as a real estate agent and achieving inner freedom. This book is sure to ignite the passion and holds the key to unlocking the power that lies within us all." Gina Ceci, Real Estate Lawyer