Coping with Multiple Bids: How High Should You Go?
The phenomenon of multiple bids occurs with regularity when certain economic conditions such as a robust economy, low mortgage rates and upwardly creeping home prices align. In this type of climate, buyers are abundant and sellers endeavor to hold out for the highest bid, often at the very last moment. The fevered intensity of such a market is fueled by brokers who have computerized access to the newest listings and are often tempted to stoke the passions of homebuyers desperate not to let their dream home slip away.
High Stakes for Homesteaders
In many respects, finding yourself in the midst of a bidding war between multiple bidders is very much like being in a high stakes poker game. A gambler's mentality can take over as buyers, encouraged by eager sellers, are coaxed to add just a little bit more to their bid in order to outbid other buyers who are thinking the same thing.
It's easy to get in over your head—and wind up with a heavy financial hangover once the war is over and you find yourself the “winner.” In these types of situations, buyers sometimes bid above their budgets and locked deals unravel when it's time to pony up the green. Sellers are aware of this, and often will try to protect themselves by taking a number of back-up bids in case their deal with the high bidder falls through.
Misery Loves Company
The cloud of uncertainty generated by multiple bidders and over-protective sellers can make life miserable for the average homebuyer. With deals subject to cancellation by sellers who get a last-minute bid or cash offer, homebuyers don't know whether to keep looking for other homes. If they're selling the home they are living in simultaneously, putting it up for sale becomes a calculated risk—they may just find themselves without ANY home.
Calm, Cool and Corrected
Losing your head and giving in to desperation is never a good thing to do, and that goes double for financial decisions like buying a home. Buyers in a multiple bidding situation need to take a break, catch their breath and consult with a lawyer or financial advisor—someone who has their interests in mind, but no interest in the transaction per se. What they will likely tell you is that there are lots of fish in the sea, and that acting with haste is never a sound policy. Sure it can be tough to walk away from your dream home, but that doesn't stop you from having another dream.
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