How to master bidding and deal with bidders

Selling your property is something of a mythical journey, where getting the best possible price is your holy grail. List at too low a price and you may end up losing. Price too ambitiously and you may not sell at all. So how do you get to that elusive sweet spot? Enter the bidding process, of course!

Be forthright enough to forgo the fixed-price approach and bring on bidding instead. Setting a price range gives your potential buyers a green light to make an offer that works for them. A double win awaits. Not only do you get a varied spread of offers, you also gain insights into where any interested parties stand within your price range and whether upping the sale price still further is feasible.

Both brokers and banks agree - bidding is the way to go! But what exactly does this sales strategy entail and what do you need to remember? Find out right here!

What is a bidding process?

The key criterion that sets a property auction apart from other house sales is having no fixed list price for the property.

The bidding process sees all interested buyers submit offers in writing, usually within a set deadline. The goal is to create a competitive environment, in which multiple bids drive the price higher. This is the perfect sales method for properties in prime urban locations and with wide-ranging appeal.

Caution! Bidding processes are not the same as auctions, because:

• There is no obligation to award the contract to the highest bidder.

• Would-be buyers can also withdraw from the purchase, even after submitting their bid.

So how does the bidding process work?

When it comes to handling the bidders involved in the process, the following three steps are normally taken:

1. Preparation and inspection

The first step involves working with the estate agents handling the sale to get all the relevant documentation together, whereupon the house is advertised online, as in a conventional sale.

Important! The advert must make it very clear that a bidding process will be applied.

In the second step, as many interested parties as possible are invited to an open house to increase the competitive situation. This paves the way for acceptance of higher prices among the bidders involved.

Tip: If you struggle to get more than a few interested parties attending, schedule a second viewing a few weeks later.

2. Bidding rounds

After the inspection, any interested parties have a fixed deadline by which all (secret) bids must be submitted. This bidding period, which is predefined and disclosed to bidders, is usually two to three weeks.

Once the deadline has elapsed, marking the end of the first bidding round, the highest bid is communicated to all bidders, who all then have the chance to increase their bid in a second bidding round. You can continue this process, but be careful: four bidding rounds should be the absolute limit. Bidders are only human and have limited patience and motivation.

Tip: A transparent and fair process should be defined and disclosed in advance. This includes the announcement of a realistic target price as well as clear information on the number of bidding rounds and the time schedule. In return, the bidders should enclose confirmation of financing from their bank.

3. Completion of the bidding process

Ideally, the process culminates when the property is sold to the highest bidder. However, if you are closer to another buyer for any reason, you may also award the contract to him or her. Conversely, the interested party may also cancel the sale.

The bidding process is not officially complete until a purchase agreement has been signed by both parties. Subsequently, certification by a notary public is required to record the transfer of ownership in the land register.

Tip: If it transpires that you are ultimately unable to reach agreement, do not cancel the other interested parties until you have signed the purchase contract with your desired buyer.

Advantages and downsides of the bidding process?

On paper, selling via bids sounds a simple and lucrative exercise. As the seller, however, you should always keep the advantages and disadvantages in mind to keep your sales strategy perfectly on point.

Advantages

• Swifter processing: Creating a schedule in advance streamlines the process far more than in conventional selling. They came, they saw, they bought…

• Higher prices: Direct competition creates competitive tension, which drives up the price of your property.

• More flexible: Sell your property on your own terms! You are free to choose the winning bidder, even if they didn't submit the highest offer. And if another interested party made a better impression, you can choose them instead. It's all up to you.

Downsides

• Potential deterrent effect: The lack of general awareness as to what a bidding process entails can put otherwise interested parties off.

• Lower demand and higher uncertainty: You may consider your home cinema in the basement or astronomy tower objects of envy, but beware. Unique and luxury features like these may get compliments from your friends, but can be a hard sell in a property auction. It can be difficult to gauge interest in these one-of-a-kind selling points.

• Lack of binding commitment: Selling via a bidding process does not involve any guarantee of sale. Interested parties can withdraw their bids at any point and thus delay the purchase.

Summing up – when to give bidding the green light

Selling a property by bidding may seem like a perfect solution, but it's not a one-size-fits-all approach that will suit every buyer, property, or location.

For the process to work well, you need numerous potential bidders of sufficient financial means. The method is best-suited to investment properties, land, or popular properties in sought-after locations.

The caveat to remember, however, is that it is rarely as simple as it may seem. Selling property is a major undertaking by any measure, and mistakes can easily happen. So, no matter what type of home you’re hoping to sell, be sure to get professional support from a qualified estate agent. Trust us, it's worth it!