When a Buyer Should Walk Away From a Bidding War (2024)

FAQs

When a Buyer Should Walk Away From a Bidding War? ›

If the home is well beyond market value and a bidding war drives the price well beyond the comparable houses or comps, this is a risky financial choice, as you may take a significant financial loss when it's time to sell.

The price is already way above your budget – If the initial price of the home already exceeds your budget, you should stay out of the bidding process. Even if you successfully negotiate house price, that number will still be out of your range.

Concessions, in real estate, are something granted from the seller to the buyer in the home sale. If the buyer begins asking for concessions such as repairs under $100, landscaping, cosmetic imperfections, or any small nit-picky requests, it could be best to walk away.

Include an Escalation Clause

A strong offer could include an escalation clause by agreeing to increase your offer if a higher bid comes from another buyer. However, make sure to include a cap on the total amount you will pay. This avoids spending more than you want.

There are normally only a few key tradables which can genuinely cause the breakdown. These might include the price, the time schedule, and the chemistry or gut feel between the two parties. This are issues of high importance, which if not resolved or negotiated effectively, should cause a walk-away.

An easy way to do this is by saying, "Based on where we are right now, it doesn't look like we're going to come to an agreement, but I've enjoyed the process of negotiating with you. If anything changes on your end, please let me know, and I'll be happy to come back and see if we can make something work."

In a buyer's market, it can be acceptable to offer up to 20% under a seller's asking price, assuming the home in question requires hefty repairs. Otherwise, you're better off negotiating 1% – 10% below the asking price. In a seller's market, buyers have even less leeway when negotiating down.

As a salesperson, it is your responsibility to sell the value of your solution. If a prospect doesn't understand it, they will not buy it. If you have made multiple attempts to convince your prospects of your solutions ROI and they don't get it, then it may be time to walk away.

How do you win bid wars? ›

You may be wondering, however, when it comes to a competitive housing market, “How much over asking price should I offer?” The answer: You may have to go at least 5 percent to 10 percent over the asking price — especially if you're looking in a hot neighborhood or a city where a lot of people are looking to live.

To avoid a bidding war in this housing market, make the seller forget about any other offer. When your offer stands out from the rest, they won't care about what else is coming their way. The easiest way to avoid a bidding war is to give the best offer upfront.

Instead, unpaid items are usually returned to the original consignor, put into a future auction, or sold privately. Often, these backup plans result in a significant loss for the seller—and the winning bidder is obligated to make it up to them.

A home seller can always reject an offer that they don't think reflects the value of their real property. Even if the offer is above the listing price, the seller has the legal right to deny the offer and accept a higher sale price.

There Are Also Other Ways to Avoid a Bidding War

One way you can show the buyer you are serious is by having less contingencies in your contract. Some other methods include making a cash offer, getting prequalified for a home loan before you make an offer, and looking for properties outside of hotspots.

No matter how good contract terms are or a deal's expected profit, walk away if you know you can't uphold contract obligations. Continuing negotiations and agreeing to a deal will only result in disappointed partners — and maybe even a breach of contract lawsuit.

As a salesperson, it is your responsibility to sell the value of your solution. If a prospect doesn't understand it, they will not buy it. If you have made multiple attempts to convince your prospects of your solutions ROI and they don't get it, then it may be time to walk away.

Stop talking when it becomes obvious the discussion can't be resolved through the current conversation. Repeating an argument and yelling are signs that you should walk away.