Bidding Wars

Q: "Recently, I lost out on a house in a multiple bid situation. When I found out there was another offer, I freaked out. What advice can you offer me for the future, in case this happens again?"

A: Multiple bid situations are tricky. Sellers who receive more than one offer have several options: they can accept the best offer, they may counter one offer while putting the others aside, they can ask all parties to submit their ‘highest and best’ offer, or they can negotiate one offer while rejecting the others. They can even disclose the amount of one offer to the other buyers in the hopes of getting the price up (Although this is not a common practice in this market, it is routinely practiced in other markets).

Being a buyer in this situation can be frustrating. Keep in mind that the amount of your offer is only one part of the offer package. Oftentimes, other terms like the closing date or financing contingencies, can carry as much weight for the seller as the amount of your offer. If two offers are the same amount, but one is offering cash while the other is dependent on financing, the seller may opt for the cash offer so as to ensure a more expedient closing. Try to keep your terms as simple and ‘clean’ as possible.

It is important that you try to remain as unemotional as possible when you make an offer. Study the comps and decide ahead of time what price you would go to and stick to it. Don’t let the competitive bid scenario cause you to offer an amount outside your comfort zone. By the same token, when you are in a multiple bid situation, don’t waste time getting to that number. We have seen buyers lose out on properties because they did not go right to their ‘highest and best.’ 

You may feel that the seller has all the power in these negotiations but remember this: you are always in the driver’s seat when it comes to spending your money. Keep in mind that inventory is high these days, and if you miss out on your #1 choice, it is likely that another property will come along that meets your needs.