Bidding Wars

Bidding wars seem to be a recurring situation. Some Realtors swear by them. Everyone seems to know someone who made 13 or 14 offers when trying to buy their home, sometimes finally getting a house they either wanted or paid too much for, and sometimes just dropping out in order to wait until the market cooled down.

The question is, doesn’t a Realtor have a duty to get their client the best price possible? Many, maybe most, Realtors agree that bidding wars are not the way they would like to do business. They are wasteful of the Buyer’s (and Buyer’s agent’s) time, energy and even money (spent in wasted home inspections, in order to bid without conditions).

It has also been said that many, if not most, Realtors also agree that in a hot market, and/or in a market with fewer listings, as unpleasant, and wasteful as the bidding war technique may be, it generates the highest price for the Seller. One Realtor, I know, called it the “lazy agent’s way of having to deal with a listing for only seven days”. He did not even agree that the Seller got the best price that way.

It seems likely that when you try to sell a house in a one week, the Buyer who would ultimately be prepared to put in the highest offer might not even get a chance to view the house, let alone to put in a bid.

What has your experience been in bidding wars? Do you have any tips to share about how you and your clients have dealt with this issue?

17 Responses to “Bidding Wars”

  1. Mark Says:

    Yes, it is annoying to buyers… BUT the strategy is not popular with all agents!

  2. TomSachdeva Says:

    Its all a matter of demand and supply , As a listing agent we have no control over what buyers pay.And I’am representing the seller and my whole effort goes in getting the best for them.I love the bidding wars.

  3. Lorie Says:

    The bidding wars are definitely a drain on the buyer agents and their clients time and resources. If you are representing the buyer, and want to keep the time productive, then you need to improve your skills and strategies in that situation.
    As far as overpaying goes, it is my obligation to follow the clients instructions – so if they say, this house is the one, then I need to advise them of what they need to do. And, also give them a price range that will be paying a competitive price, but not overpaying outrageously. Which, I have seen others win the bid – but my comment has been, I don’t want to see the buyer having to sell in the very near future.
    And as a seller agent – well I love to be setting new prices for the neighborhood – after all, I am there to get the seller top dollar….so bidding wars certainly assist to do that.

  4. Kari Says:

    I think if you read through our code of ethics creating a bidding war is actually in violation of this code. The reason for implementing buyers agents and the code of ethics is to make real estate transactions fair to both buyers and sellers. Creating bidding wars is a direct violation of buyers rights and of our code of ethics. I don’t know why certain boards allow this, because certainly there are boards (like mine) which don’t allow it due to this violation. I agree it’s lazy agents, who are not much better then used car salesmen, who use this approach. I think more ethical agents have the right way of doing business. As agents we still have a duty of responsibility to the buyers when representing the sellers. And once of those responsibilities is to be fair and honest. I don’t think agents are being either when starting bidding wars.

  5. YYC Says:

    Multiple offers *called “bidding wars” by the media and those not involved in the industry* typically give a seller the best opportunity to receive full value or more for their property. Buyer’s involved in multiple offer situations submit sealed bids which are then reviewed and compared. Often emotion will override common sense and buyers will write offers that far exceed the market value of a property.

  6. Wendy Says:

    Working mainly with first-time buyers, I advise them as to the issues involved and consequences of “bidding wars”. Most appreciate that they are frequent in seller market conditions, and virtually all have been unwilling to take part. Smart buyers!

  7. I found myself in bidding wars quite a few times over 2009, and must say I did not enjoy it a bit. I did not close one multiple offer bid, and some of our offers were very good. In one case, I was up against 8 other offers on and older unit in a building where similar units were going for about $320,000, but it went close to $370,000. Even much larger units were not going for that much.

    I found myself in exactly the situation desribes in the first paragraph. And yes, I do feel we have to try to get our clients the best price we can, but we also have to close the deal, and we are not succeeding if we can’t get them into a home.

    Many good places did pass us by, but my clients were quite picky, and would not accept my strong suggestions, continuing to press on to get the very particular one they wanted. There were not a lot of listings available, and we had exhausted the ones that were, so we were on the edge of our seat waiting for new listings, but the few that they likes happened to be ones that other people were also waiting for, so there we were, multiple offer after multiple offer. After many offers (all multiple offers), they finally had had enough, and settled for something that was not great, and paid more than they should have, but they were still not willing to take my advice. Months earlier, I could have had them into someting much better.

    I find sometimes people are quite defensive when I try to steer them, and this is something I have struggled with, especially knowing (especially in this case) that they could have done much better. This one will bother me for a long time, I think.

  8. Harry Says:

    I don’t participate in bidding wars the best I can! I always advise my buyers to stay away from them as well. There are too many irresponsible agents out there who give us all a bad name. These are the type who intentionally create ‘wars and waste everybody else’s time. Often they push through their own offer by using the other agents’ offers as “evidence” and convincing their own buyer to pay more!!! They don’t even tell their seller that they have created a bidding war on purpose!
    Let’s stay away from these agents and their stupid listings. Our industry needs a CLEAN-UP.

  9. Broker Bob Says:

    Bob has enjoyed the Multiple Offer situation.
    I try to analyze the situation. Did the Listing agent price the property deliberately too Low? Then they are creating the bidding war and it shoould sell for a lot more. Buyers have a false sense of value by always looking at the price, then what they could get for this low price. Once you show the comparable sales in the area and other homes asking a lot more – the job gets easier.
    All 5 areas need to be Improved in offers: Price, closing, extraas, Financing & Inspection. I do this and often get the property for my clients. Not all clients will co-operate, get scared, but they understand more.

  10. Don Edmunds Says:

    As a Seller’s agent I believe whatever the technique used to get your client the best possible price is fine.If that’s what you call “lazy”, so be it.My client’s happiness is what fuels my business. If a Buyer(s) are willing to pay, then that is between them and their agent.
    I also think as a Buyer’s agent I need to educate my clients with statistics and prices of homes and areas and then ultimately it will be their decision to proceed. We have a duty after that of “Obligation” if they want to get into a bidding war.

  11. I tend to agree with the belief that multiple offers are more the result of market forces (economics 101: supply & demand) as opposed to reflecting a very savvy strategy. In my experience, Sellers are often not coached through the risks associated with failed attempts at garnering multiple offers – and there are many such examples. On a lighter note, I always laugh at the SOLD signs that indicate the property sold above asking. I have yet to see any that advertise a final price below asking.

  12. Yes, I have worked a listing into a bidding war and have competed in a bidding war; and found them both financially rewarding and annoying. But one thing that has been lacking in this analysis is the vendor’s wish for a bidding war and the market’s envirnment making it natural for them to exist.

    I find alot of Realtors give themselves too much credit and feel that they have created this bidding war all on their own. When in fact, it was probably the vendor who has stated from the onset that this is what they want. They want buyers to come in and get emotional and worked up about their place. It exites them and sometimes if you haven’t created this scenerio, they believe that it is your fault. A bidding, for many sellers, is the end-all solution to their situation.

    Also, this whole question of defining Realtors who do it as “lazy” is unneccessary and name calling is only that, name calling. If the market lends itself to bidding wars, then agents will use them and good for them. Right now, in our city at least, the Supply and Demand is out of whack, with the buyers outweighing the sellers in large numbers. This inbalance gives the sellers great power and the ability to stage bidding wars…and actually these wars just happen on their own, as there are hordes of buyers going from one house to another, trying to scope them up.

    So when it comes to blaming agents for using bidding wars, step back and take a look at the bigger picture. Because the are a few other factors that lend themselves to this scenerio.

  13. I dislike the multiple offer scenario both as a Buyer and Seller agent- however the market is what it is… and so we have to deal with it in our clients best interests. When I think back at all those “wasted” hours I have put into unsuccessful bidding wars in the last 8 months or so ….
    But- on the other hand my listings have sold at the speed of light( some with multiple offers) and that kind of balances out things somewhat.

  14. Generally bidding wars don’t get out of hand down here in Nova Scotia. When one comes across a situation usually the Vendor will allow an inspection (to clear up any major issues) but they will also have a backup offer in place (or 2) in case the buyer tries to negotiate after the inspection.

    I don’t like them as a buyers agent. I would rather be quick at the draw and get the first offer in.

  15. Here in Quebec multiple offer scenario:

    % of properties sold above asking price:

    Rosemont-La Petite-Patrie (22%)
    Outremont (17%)
    Plateau-Mont-Royal (16%)
    Côte-des-Neiges-Notre-Dame-de-Grâce (14%),
    Villeray-Saint-Michel-Parc-Extension (13%),
    le Sud-Ouest (13%),
    Ahuntsic-Cartierville (11%)
    Mercier-Hochelaga-Maisonneuve (10%).

  16. Jeff Deveau Says:

    We’re starting to see less bidding wars here (just outside of Vancouver). the market is getting a little more saturated and Buyers are starting to sit on the fence a little…