How to sell a house using the bidding process.
Anyone planning to sell their house is aware of the dilemma: On the one hand, if you set the price low, the property will sell quickly. However, you may worry that you accepted a price below its value. On the other hand, if the advertised price is high, you might find that no one is interested. The bidding process may provide a solution.
What is the bidding process?
With the bidding process, the owner does not advertise their house at a fixed sale price. Instead, any interested parties will have the opportunity to bid on the property. This creates a competitive situation among the bidders if there is sufficient demand, which can maximize the sale price.
Preparing for the bidding process
Preparing for the bidding process is similar to preparing for a traditional house sale. After creating the sale documents, the seller advertises the property on internet portals and possibly in newspapers in order to raise awareness among potential buyers. It is important that the bidding process is referred to in the advertisement. The seller can define a minimum bid, but that is optional. Real estate agents can submit bids too.
It makes sense to state a fixed viewing date and time in the advertisement to attract as many interested parties as possible at a specified time. A large number of visitors will increase the competition among the bidders. If the response to the first viewing is low, it is advisable to have another viewing a few weeks later.
How does the bidding process work?
After the viewing, potential buyers can submit their bid for the purchase price within a specific bidding deadline, which is usually two to three weeks. At the end of the first round of bidding, the seller discloses the current maximum bid – then each bidder has the opportunity to increase their bid. For most bidding processes, the second round is the final round. However, the seller can also hold more bidding rounds.
The seller should communicate the number of bidding rounds and the timeframe for the bidding deadlines to all participants in advance to ensure a proper, transparent process. The bidding process is completed when the seller and interested party come to an agreement and sign the contract of sale. Then a notary certifies the contract, and the transfer of ownership is entered into the land records.
No obligation with the bidding process
If the seller is not satisfied with the highest bid, they do not have to accept it. Unlike auctions, there is no obligation to sell in the bidding process. However, the interested party can withdraw their bid too. The buyer is not obligated to pay the purchase price until the contract of sale has been signed and notarized. It is therefore advisable to stay in contact with the other bidders and to renegotiate if the contract of sale falls through.
The pros and cons of the bidding process
Although the bidding process is becoming more popular, especially in urban centers, this sales method is not a free ticket to a smooth house sale. Sellers should be aware of the following advantages and disadvantages.
- The bidding process attracts attention to the property and appeals to many interested parties.
- The property is often sold faster than with traditional advertising, with the process usually taking no more than three months.
- The competition among interested buyers can raise the price of the house.
- The seller does not have to accept the highest bid.
- The bidding process attracts bargain hunters who do not make serious offers. Sellers get around this by only accepting viewings with prior notice.
- Not all interested parties like competitive pressure; some may be overwhelmed or deterred.
- The competition could also have a negative impact on financially strong buyers as they do not want to make the effort.
- The process may not necessarily result in the sale of the house since buyers can withdraw their offer.
Interesting alternative to a traditional house sale
Private sellers are very passionate about their property, which is why getting a good sale price is very important both financially and emotionally. If the property meets the criteria of being in a sought-after location and having a broadly appealing design, the bidding process is a promising alternative to traditional marketing. If the seller does not receive any attractive bids, they can repeat the bidding process at any time or switch to the traditional method of selling a house.