If you’ve been paying attention to Richmond’s real estate market over the last year or two, you’re no stranger to the concept of a bidding war. With low inventory and high competition, this is something we have become very familiar with. Whether you’re buying or selling – or both – it’s important to understand how bidding wars are created and the best ways to navigate these sometimes rocky waters.
In the price-fixed world we live in, real estate transactions can feel confusing. While the prices we see on clothing, groceries, and restaurant menu items aren’t up for negotiation, real estate pricing is always subject to debate. Both buyers and sellers need to realize that, in most cases, the listing price won’t be the price at which the home actually sells.
Our job is to help you make sure that any potential variability swings to your advantage.
Sometimes sellers want to hike up the price of their home, even when they know it’s worth less. Their thinking is to aim high and then, even if they have to compromise a bit, they still make what they’re hoping to make. The problem with this strategy, as a seller, is that the right audience never sees the home: the people who can afford it generally want something with better or more features and the people who have a smaller budget are discouraged by the price and cross it off their list.
If you’re a seller looking to create the environment for a bidding war, it’s in your best interest to price your home as accurately as possible, with a clear understanding that asking price isn’t necessarily the final transaction price. That way, budget and features match the expectations of those who come to look at the home and qualified, highly interested competition can generate demand which may end up leading to a bidding war.
As a buyer, lean into your agent to let you know if something is overpriced. He or she (or hopefully we) will know if there’s some wiggle room to bid at a lower price. Plus, if a home is overpriced, it likely hasn’t gotten much engagement or has been sitting on the market for quite some time, so even a low offer might be enticing when sellers are getting antsy.
Don’t forget about Terms…
Whether you’re making the offers or considering them, keep in mind that while price is just a couple paragraphs of the equation, the ‘terms’ of the contract can be pages and pages long. Financing and inspection terms, contingencies, settlement dates, possession dates, closing costs, and post-occupancy conditions (to name a few…) all comprise this “terms” section, which can collectively either compel a seller to take your offer seriously, or allow a buyer some wiggle room on price.
Maybe the buyer is willing to absorb some of the inspection item costs, if any issues are found. Maybe the seller has a time constraint that the buyer is willing to work around. Maybe a “rent back” agreement can be offered in a situation where the seller doesn’t have other living arrangements prepared for after closing. The possibilities are endless and can really create a win-win situation for both parties, when price isn’t negotiable for one of the parties involved.
The idea of a bidding war is daunting for a lot of people: Sellers want to do anything they can to create one, and buyers tend to run away from them in fear that there’s no hope of winning and staying in budget. Ultimately, whichever side of the equation you find yourself on, there are always ways to think critically and reach a solution that meets everyone’s needs.
If you’re a buyer with a tight budget, don’t stray away from a home in high demand! Your agent can help you leverage circumstances and/or desires to design a contract that checks as many boxes as possible for the seller, even if price isn’t one of them.
And as a seller, demand generated through accurate pricing and aggressive marketing can create the competitive environment that has made bidding wars so common here in RVA.
Either way, there’s no need to be intimidated. Let us be your advocate.