If you’re buying or selling real estate, you’ve probably heard of the term “Bidding War” but what does it mean? What are the best ways to handle this type of battle? In real estate, we call a bidding war multiple offers, and it’s really not as scary as you may think it is.
BIDDING ON HOT TICKET HOMES
When a house is listed for sale, there is always a chance it could start receiving multiple offers. Maybe the house is extraordinarily unique, or maybe it is so jaw-droppingly beautiful that so many people want to buy it.
When there aren’t many houses on the market for sale, but there’s still a large number of home buyers wanting to move to a certain area, the scales of supply and demand are tipped to one side.
When buyers are willing to pay more for a home than the asking price, it’s usually because they’re dead-set on this area and are willing to pay a premium to move into that neighbourhood.
DO ALL HOUSE SELLERS GET MULTIPLE OFFERS?
The short answer is no – and contrary to what you may have heard, real estate agents don’t want to price a house so low so as to encourage multiple offers.
It’s a REALTOR’S® job to price a home properly, and according to what other homes in the neighbourhood have already sold for.
Agents suggest prices based on the size of the home, its features, the finishes, and the value of the land it sits on.
If other similar homes on the street have recently sold for a million dollars, chances are the price we recommend will be in that price range too. If the comparable homes on the street have recently sold for $400,000, then we would suggest to price a home in that range too.
It’s all about choosing a price with data-driven information related to what the market has already shown will be an acceptable price in any particular neighbourhood.
If a house receives multiple offers after all of that, it’s just an unexpected surprise that we deal with when it happens.
HOW DO MULTIPLE OFFERS WORK?
When an offer is placed on the house, we routinely notify all the other real estate agents who have shown the property to their clients. We tell them:
- An offer has been made on the property.
- The date and time the sellers will be reviewing this offer.
- We give all other agents an opportunity to submit an offer on behalf of their buyers too.
- Everyone brings their best offer to the table, and the seller decides whose offer they want to accept.
There are times when we get more offers than expected and sometimes we don’t – but the potential is there. It’s considered a courtesy to let all agents know so they can talk to their clients about putting in an offer too.
HOW PRICE NEGOTIATING WORKS
If a property only receives one offer, then there’s going to be lots of room to negotiate. The buyer and the seller will go back-and-forth with the offer, finally coming to an agreement on price, conditions and other closing details.
If there are multiple offers, it’s generally a one shot deal. Buyers put in their best offer on the first try, and hope the seller decides to accept it.
Things that can make your offer more appealing than the other offers are:
- Conditions: try limiting or eliminating any conditions from your offer.
- Closing Date: choose a date that is appealing for the sellers and works with their preferred timeline.
- Price: try to choose a price that the sellers would find acceptable given the market and their home’s amenities.
THE HIGHEST BID DOESN’T ALWAYS WIN
Believe it or not, the highest bid-price doesn’t always win. Sometimes the sellers are more concerned about other factors in the offer than the price alone. That’s why a real estate agent is a great asset because they’ll know how to put together an appealing offer that gives you a better chance of coming out on top.
You can read Tips for Putting In a Perfect Purchase Offer on a House for more details.
At a pre-determined date and time, the sellers will sit down and review all of the offers that were presented to them.
There’s no peeking beforehand and none of the agents know what each other has submitted. We go to great lengths to maintain this privacy.
During the presentation the sellers will examine all the offers from top-to-bottom, and determine which one works best for them.
Any offer that isn’t accepted will be returned to the buyers and they’ll simply have to continue their home-search.
SUPPLY AND DEMAND
Just like with any other product or service, when there isn’t enough supply to meet the demand, we see prices go up.
If many homes on a street have sold for more than their asking price, that shows the particular street can start to set higher asking prices right from the beginning. That’s how a house that was listed for $200,000 ten years ago can now sell for $800,000. The market dictates that properties in that area are able to sell for more.
As always, check with your REALTOR® for advice on how to handle multiple offers, whether you’re buying or selling. We’re here to help!