Negotiating on a house can sometimes be challenging.
When many people are interested, you may need to work hard to be a successful buyer.
This blog explains everything you need to know about bidding wars on houses.
Find out how to avoid or increase your chances of winning a bidding war on a house.
What is a bidding war on a house?
A bidding war happens when several people are interested in buying a house.
These individuals will try to ‘one-up’ one another with progressively higher offers.
A bidding war is often an excellent scenario for a seller. It pushes their price up.
And it also means they have fall-back options if one of the sales falls through.
An estate agent will inform potential buyers of other offers made on the house. But they can’t give the exact amount unless the buyer has permitted them to.
You’ll be informed if someone else has beaten your bid but it’s up to you whether to offer even more.
Highest bids don’t always win
Homeowners won’t always choose the person with the highest bid. Other issues might be at play, such as:
- The timing of when a buyer can complete the purchase
- Conditions around the house being furnished or unfurnished
- Whether it’s a cash buyer or not
- A general sense of trust (sellers may fear the possibility of a sale falling through or gazundering).
How common is a bidding war on a house?
Bidding wars are quite common during a seller’s market. This means there are more buyers on the market than houses for sale.
This is because buyers have fewer options to choose from.
They are rare in buyer’s markets, where buyers have more options and negotiating power.
Buyers are thus unlikely to go ‘above and beyond’ to secure a house. They’ll often walk away from a bidding war.
How to avoid a bidding war
Entering a bidding war is always a choice.
If you set a clear maximum price in your head and refuse to go above this, you may need to settle for losing out.
This ensures you don’t offer more than you can afford.
Exclusivity agreement
You could also ask the homeowner to consider an exclusivity agreement on the property.
This means they agree in writing not to sell to anyone else while you gather your funds. You may need to offer an incentive for them to do this.
Quiz the estate agent
You should ask the estate agent how much interest there is in a property.
Don’t forget that estate agents sometimes exaggerate interest in a house.
You could check the Rightmove or Zoopla listing to see how long it’s been on the market.
This could indicate limited interest if it’s been on for over 6 months.
Show that you’re the most suitable buyer
A buyer will view you favourably if you demonstrate that you’re a better prospect than other buyers.
Show that you can proceed straight away. Or offer incentives, such as covering their legal fees.
Cash buyers can also have an advantage in this situation, too.
How to win a bidding war on a house
You should demonstrate why you’re a better prospect than other buyers.
This may involve an ability to proceed straight away. This is common with cash buyers.
A mortgage in principle is another example that could cause a seller to choose you over others.
You may also try to throw in incentives, such as covering the seller’s legal fees or removal costs. You could also increase the size of your initial down payment.
Make sure your initial offer is below your maximum budget. This ensures you have room to go upwards if a bidding war begins.
Write a personal note to the seller or try to build rapport with them in another way. They’re more likely to sell to someone they get along with.
How do I know if there’s an ongoing bidding war on a house?
You can ask the estate agent representing the house. They’re often known to exaggerate, but they’re not allowed to lie.
Pay careful attention to their response.
You should also check how long the house has been on the market.
Interest may be limited if it’s over six months and isn’t listed as ‘Under Offer’ or ‘Sold Subject to Contract’. You should find out why this could be.
Bidding wars are more common in a seller’s market. Keep your eyes peeled for bidding wars when economic conditions favour the sellers.
Do some sellers try to encourage a bidding war?
Yes, a seller often tries to bounce buyers off each other. This is done to pressure each party into increasing their offer.
This can be a risky strategy in some cases. Pushing them too far can cause everyone to walk away.
And someone may also be pressured into offering a sum they can’t afford.
It’s entirely your decision whether to proceed with a seller encouraging this scenario.
If you consider it morally wrong, then you may feel uncomfortable. But many others would argue it’s simply ‘good business’.
