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How to Navigate a Bidding War as a Seller

In a competitive real estate market, bidding wars are common. As a seller, this seems like the perfect chance to drive up the purchase price for your home and squeeze every dollar from buyers.

But you need to be careful.

If not managed properly, a bidding war for your home can backfire, causing you to restart the entire sales process. By focusing on the details, looking beyond the sale price, and managing your expectations, you can get the best results from a bidding war.


What is a Bidding War?

A bidding war is simply a situation when one buyer is bidding against another in an effort to purchase a home. Much like an auction when two buyers are bidding higher and higher, a bidding war is a way to drive up the price of a property and secure the highest possible number.

To be considered a “bidding war,” there needs to be active competition between buyers. If two buyers send in offer, you simply have multiple bids. But once a buyer ups their offer to beat out the other buyer, you have a bidding war.

Should You Encourage a Bidding War?

It is possible for sellers to encourage a bidding war for your property. By simply informing potential buyers that you have an offer for a certain amount, you may be able to start a bidding war that brings more money for your property.

However, it’s essential that you maintain honesty and integrity. If you don’t have another offer, it’s unethical to tell buyers that you are considering other bids. Basically, you should never attempt to start a fake bidding war. But if a real one happens organically, then you should take a smart approach to ensure the best results.

How a Seller Should Handle a Bidding War

Look Beyond the Offer Numbers

Although the primary goal of selling your house is to get the best possible price, the highest bid is not always the best. Factors like the buyer’s credit and borrowing capability will come into play, as will factors like contingencies, inspections, closing dates, and a variety of other details that work themselves into an offer. Even factor’s like the borrower’s debt and savings could come back to haunt an offer, so sellers need to remember that it’s not always about getting the biggest number from buyers.

Sellers should understand that the buyer’s financial profile plays a role in their ability to secure a loan. Vetting each buyer, therefore, is critical, as you don’t want to halt the sales process only to have the purchase come to a dead end.

When reviewing offers, look beyond the number and focus on details. Contingencies, for example, can be a major burden when selling a home. As a seller, the fewer contingencies involved in the offer, the better. You may have a strong offer, but it could come with a variety of contingencies like fixing windows, repairing siding, replacing carpets. These typical contingencies makes selling the home a larger hassle, and eat into any potential profits from the sale of your home.

A smaller offer with few contingencies may be better than a larger offer with scores or requirements and contingencies.

Prioritize Early Closing Dates

If getting the best price is the top priority for most sellers, selling the home quickly is likely the second. If you need to sell your current home as fast as possible, and you are seeing the beginnings of a bidding war, communicate to sellers that you will place a high priority on offers that have a shorter closing date. (And remind them that more contingencies create a longer process.)  Make it clear that while you value total price, you will give strong consideration to competitive offers that will help you move the property off the market as fast as possible.

You can even talk with your real estate agent and place these types of messages on your marketing and listing information.

Don’t Loose Touch with “Backup” Bids

When the real estate market is competitive, it’s easy for buyers to get caught up in the rapid pace of sales and become highly enthusiastic. They may get caught up in the exciting moment and bid higher than what they can afford or, at the very least, higher than they are comfortable. After a night of thinking, they may realize they overbid on your house and rescind the offer. There is always a chance, however small, that the winning bidder may be unable to unwilling to followthrough on their offer. Between buyer’s remorse or a reassessment of value, it’s possible that a buyer may pull their bid, even if the bid has been accepted under contract. Basically, nothing is sold until it’s sold.

For these reasons, it’s important that you stay in touch with the “losing” bids. Keep people informed on the process, and let them know that if things go wrong, you would reconsider their offer. If needed, you’ll be glad you maintained communication with these potential buyers.

Manage Expectations

Just as buyers can get caught up in the excitement, so too can sellers. When numbers start rolling in, and each one is higher than the last, expectations become heightened and seller can become mesmerized by the thought of selling their home for $150,000 above asking price. It’s important that you maintain a level head and manage your expectations so you don’t end up with massive disappointment.

A balanced perspective is essential. Keep a cool head and focus on the big picture, which is selling your home to the best possible buyer at the best possible price. Remember that good offers can fall through, so manage your expectations accordingly.

Bidding wars are common, especially in competitive markets. But a home that is priced right will always find the perfect buyer. By managing a bidding war properly, and keeping your expectations in check for the best results, you will be able to sell your home and move on to your next fantastic property.

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Whether you are buying your first home or purchasing a vacation property, contact our staff today! We are proud to serve San Diego and the surrounding area, and we’ll do everything it takes to increase your chances of mortgage approval!

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