A bidding process is a method of selling real estate that also allows the market price to be determined and may allow more potential buyers to be found. In a conventional home sale, the seller sets the price at which the property can be purchased. With the help of an appraisal, the price of the property or land is determined and then offered at this price.
In the bidding process, on the other hand, there is no fixed purchase price. Each prospective buyer has the opportunity to propose a price for the property. The bidding process can be handled through a broker, although it doesn't have to be. A broker takes some of the work off the seller's hands, including collecting and managing the bids.
If a property is to be sold by bidding procedure, the seller must know the process. First of all, the advertisement must make it immediately clear to interested parties that a bidding process is being used for a property. In particular, if a minimum price is stated, it must be clear that this is only the lower limit. Especially in the case of high-priced real estate or if there is a strong demand, the procedure can be shortened with the help of a minimum price. Offers that are too low can then be excluded directly.
In addition, sellers can set a deadline by which all offers must be received at the latest. This encourages interested parties to act quickly. The usual time is two to four weeks from the date of publication of the real estate advertisement. If the salesman wants to save individual house inspections, he can specify a collective date, to which all prospective buyers can come. Then, each prospective buyer has the opportunity to take a close look at the property and make his or her individual bid. There is also the possibility to conduct a dynamic bidding procedure. In such a procedure, each interested party is allowed to adjust his bid upwards (or downwards) as long as the deadline has not yet expired.
Nowadays, bidding procedures can of course also be carried out online. In this case, the prospective buyers bid via an Internet platform within a fixed time window. They log into the protected platform area with the access data they have received and can respond to the bids of the other bidders at any time during the period. Since the prospective buyers can see the respective highest bid and follow the changes, an online bidding process proves to be very transparent. The time window for bidding is usually very short and only open for a few hours. A high sales price can usually be achieved within a short time via the online bidding process.
The bidding procedure is a good choice if you want to achieve the highest possible price when selling real estate. It is also worthwhile especially when no valuation of the property is possible by other means. The bids of interested parties provide sellers with tangible evidence of what the property is worth to potential buyers. In the case of attractive properties, the seller is spared lengthy negotiations about the price with the buyer: if one interested party drops out, there are usually more to follow.
Since a property can be marketed much faster with the help of the bidding procedure than with the conventional sales, this method is also suitable if the salesman is under time pressure and he wants to sell the property as fast as possible. A bidding process can give the prospective buyer the impression that he is getting a bargain. The willingness to buy may therefore be higher than if the property was offered at a fixed price.
A bid submitted does not automatically mean that the interested party will actually buy the property at that price. There is no certainty until the purchase agreement is signed. A potential buyer can still negotiate the price even though he has already placed a bid. He can also withdraw from the purchase at any time.
Due to the lack of price and possibly lack of market knowledge, potential buyers may be overwhelmed. In contrast to a conventional sales process, in which time is taken for each prospective buyer, the bidding process is very impersonal. The effort involved should also not be underestimated: The implementation of a bidding process is costly, as various viewing appointments or a collective appointment must be organized. In addition, the bids have to be collected, if necessary also with second or third bids.
The big difference between a real estate auction and the bidding procedure is the binding nature of the bid submitted. In the bidding process, the owner of the property is not forced to sell. Sellers should be aware that the property is not necessarily sold to the highest bidder. The seller can choose the buyer he likes best. However, the bid of the interested party is also not binding and can be withdrawn or renegotiated at any time. The transaction is not binding until the notarized purchase agreement is signed.
Not sure if the bidding process is the right way for you to sell your real estate or buy a new one? Feel free to contact us at any time if you have any unanswered questions - as a reliable and experienced partner, we at ACCENTRO will help you with any questions you may have.