The real estate bidding war is a Real Estate Marketing strategy. It is mostly initiated by sellers. It is often confused with multiple offers. Both are not the same. It is important for buyers and sellers to gain a clear understanding of and the difference between the two. It is always better to avoid entering into a bidding war. This increases the chance of buying your dream property. You end up saving a lot of money when you avoid a real estate bidding war. Find the full list here of the things you must know about the real estate bidding war.
Bidding War Vs. Multiple Offer
Multiple offers is a situation where many buyers provide a written concern on buying a property. A bidding war is nothing but oral negotiations between the listing agents and the buyer’s agents. Listing agents work on behalf of the seller. They look for better offers by contacting many other buyer’s agents. They create a multiple offer situation to influence different buyers to submit their offers for the same property.
Supply and demand are the basis for bidding war. The preference or desire for a particular property also increases the chance of entering into a bidding war. Multiple offer situations do not end up in a bidding war.
Why Bidding War?
A bidding war is happening due to competition in the real estate market. It is beneficial to sellers and listing agents. It helps them to sell properties above the existing market value. Buyers find it challenging to buy their dream property when entering a bidding war. Buyer’s agents also face hard times as they do not receive the right compensation for their hard work. Some real estate agents create a bidding war to create an impression of multiple offers. It is a type of abuse where the buyers are misled by the seller’s agent. It results in raising the bid or closing a deal. This has raised serious concern over bidding wars and ways to avoid them. A bidding war can be beneficial and detrimental at the same time. It is considered an unethical practice in certain situations.
Is Bidding War Legal?.
Bidding war is legal, and there is no law prohibiting the same. Real estate agents work in favor of the seller. If the seller insists on initiating multiple offers, the listing agent must do it for their client. They can escalate bidding war on consent from their seller. In the course of bidding war, listing agents can shop properties and contact several other buyer’s agents. No law prohibits them from revealing competing offers. This helps real estate agents to get better offers for their seller’s property. It is completely legal to go for multiple offers and bidding wars. Some states restrict entering into bidding wars.
Ethical Standards of Bidding War
Bidding war is considered to be an ethical practice. There are no ethical obligations on multiple offers and bidding wars. It is not an unethical practice of listing agents to reveal competing offers to buyers. Real estate companies must conform to the National Association of Realtors Code of Ethics. This is to protect buyers and buyer’s agents.