Bidding and overbidding together with 20 other people has become a common practice in popular cities such as Haarlem. This sometimes leads to panic situations. People might even leave the voorbehoud van financiering.
In the last few years, buyers could take their time to view a house, take a few weeks to consider a negotiation strategy, and then bid under the asking price with several ontbindende voorwaarden.
Not anymore, at least not in the most covetted regions of Amsterdam, Haarlem and Utrecht. Nervous bidding systems are common in popular areas. One of them is ‘verkoop volgens inschrijving’. Everyone interested makes a bid before the determined deadline, without knowing other people’s bids. The seller then chooses from the biddings on the table.
On one hand, this system could be seen as fair. A down side could be that bidders are in a black box. They must make offers without having information about their competitors. Research reveals that in a situation where several people estimate the value of an item, the average resembles the true value. That is called “the wisdom of the crowd”. But this idea implies that there are always people who aim too high, and in this real estate market, those are the ones that get the house. It is called the “winners curse”.
This is not the only bidding system used nowadays. Traditionally, you are in negotiation when the seller responds to your bid. The next bidder is only allowed to enter negotiation when the first bidder is rejected.
In practice, the broker asks the first bidder to equal the higher bid. This is possible until the last moment. It is therefore risky for the potential buyer to extend the signing of the voorlopige koopcontact in order to talk things over with a financial advisor.
An oral agreement is not binding. As long as there is no signature, buyer number 2 can make a bid. The broker is obliged to tell the seller. That’s the risk of a stressed market. Are there more serious potential buyers? In that case, the seller can choose to change bidding system, even when in the middle of a negotiation.
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