Multiple offers aka “Bidding Wars” are common in the real estate market. To fully understand what a bidding war is, here is some info to help assist you in preparing yourself for these overwhelming situations.
The term “Bidding Wars” is used to describe a situation where more than one buyer makes an offer on a property at the same time. These buyers are essentially competing with one another. Please do not get confused and think of it as an “auction” involving “bids”.
“Bidding Wars” occur with properties that are sought out or are located in a desirable neighbourhood.
Sellers, to generate multiple offers, will set a lower listing price along with a specific date to review offers (Ex: Sellers to review all offers on Monday December 5, 20xx at 7:00 pm.).
The goal for a seller is to generate as much traction by having prospective buyers compete with each other on the date of offer presentation. *Note: Not all bidding wars end up with a firm deal*
So, how does this all work?
When you submit an offer and another buyer (or buyers) come to the table, you will never know what the contents of that offer is, and vice versa they will not know what yours is. Your offer may be $1 below the highest offer, or $20,000 above the next-highest bid. Only the sellers will know the contents of each offer.
You are entitled to know how many offers you are competing with. The number of registered offers must be shared with other registered Buyers, but again, not the contents of the offers.
Most “Bidding Wars” involve agents presenting their buyers offers to the sellers and listing again in person. Again, there is usually a set time and location (usually the subject house or the Listing Agent’s office). All offers are presented in the order in which they were registered. Potential buyers and agents will have to wait for the verdict of the bidding war, and this can take an hour to several hours.
It is important that if there are competing offers, you submit your best offer to avoid being ruled out off the bat. *If you are the ONLY offer on the table, there is more room for negotiations, and sometimes it can work in the buyers favor*
The sellers will select the best of all of the offers presented to them. This is purely subjective and based on the seller’s specific situation (which usually is a combination of the most attractive closing date, deposit, price and conditions).
Sellers are not allowed to sign back on more than 1 offer, so again, make your offer as strong as possible. If two or more offers are very close, potential buyers may be asked to both improve their offers. Again, none of the contents can be disclosed to either buyer. You will have to make your best judgment on improving your offer or staying firm.
If you are the lucky one, your agent will give you good news that you won the “Bidding War” and the house is yours.