Property sellers usually choose the following route: The property is offered for sale at a certain price, either privately or via an estate agent. This is followed by viewings, often price negotiations and finally, in the best case scenario, an offer to purchase followed by the conclusion of the sale. However, in addition to this classic sales strategy, properties are often sold by means of bidding procedures. “They are still relatively rare in Austria, as they usually involve more effort,” says Georg Spiegelfeld, Managing Director of Spiegelfeld Immobilien and President of Immobilienring Österreich.
What are bidding procedures?
Roughly speaking, the bidding process involves interested buyers submitting bids for a property within a certain period of time – whether in person, by post or now usually online. At the end of the bidding period, the seller can finally decide on an offer. In principle, a distinction can be made between two forms of bidding procedure, the structured and the open. The former is a multi-stage procedure. At the end of each sales round, the seller can announce the highest price currently offered. In the latter, interested parties submit their bids after viewing the property. Bidding procedures can take place privately or with an estate agent – in the latter case, commission must of course be paid by the person who commissioned the estate agent, i.e. the seller, in accordance with the buyer principle.
How does a bidding process work when buying a house?
Step 1: Asking price
Whether with or without an estate agent, the procedure is the same: before the bidding process begins, the seller should determine the desired selling price. An expert’s report is recommended as a guide. “An estate agent can also determine the approximate market value,” says Spiegelfeld. This is the price that customers are currently paying for comparable properties in the area. Unlike a traditional sale, however, the seller does not disclose their asking price, but waits for bids from interested parties. However, he can very well name a minimum purchase price.
Step 2: Exposé and advertisement
An exposé is then created with the most important information about the property, the surroundings and photos, and the property is offered for sale. Important: It must be clearly stated in the advertisement that it is a bidding process; the same applies if a minimum price has been set.
Step 3: Viewing
Once interested parties have registered, viewings are on the agenda: “In bidding procedures, it is often worth offering just one or a few appointments, to which several interested parties then come,” advises Spiegelfeld.
Step 4: Offer deadline is running
Once the viewings have been completed, the offer period begins, usually between three and six weeks. During this time, interested parties can submit their written purchase offers.
Step 5: Decision time
Once the bidding period has expired, the seller can accept the highest bid, or possibly a different one. If this is too low, the seller can negotiate with the interested party to improve the offer or decide not to sell the property. However, if he accepts the offer, both parties have agreed on the further terms of the sale or purchase and the financing is in place, the next step is next.
Step 6: Signing the purchase contract
What are the risks of buying a property in a bidding process?
Basically, a bidding process is no more or less risky than a traditional real estate purchase. However, the knowledge that you have to prevail against the competition can be considerable: However, prospective buyers should take care not to get carried away, especially in those bidding processes where the current highest price is announced, so as not to exceed their financial limits. In this context, don’t forget that there are additional fees on top of the sales price!
Is a bidding process binding?
No, the offer is not binding; prospective buyers can withdraw their offer. However, the seller is also not obliged to actually sell the property to the highest bidder. Rights and obligations only arise for both parties in the bidding process once the seller has accepted the offer.
Is it still possible to negotiate in the bidding process?
As the offer is not binding, it can be renegotiated by both parties after the offer period has expired.
How do you prepare for a bidding process?
As already described in the procedure, sellers should be aware of their asking price before the process begins. If they carry out the bidding process without an estate agent, they should, as with a traditional sale, ensure that they have all the necessary documents to hand, from an extract from the land register to any necessary permits. If an estate agent is commissioned with the sale, they will take on this task.
As a prospective buyer, you should get an overview of comparable properties and the prices at which they are advertised in advance. This helps to get a feel for the bid. It is also helpful to clarify your financial scope in advance
When is a property worth bidding for?
Spiegelfeld sees potential for bidding processes, especially for particularly sought-after properties. “In this case, collector’s prices can be achieved with the right planning,” he is convinced. But even for less interesting properties, bidding processes, which can be carried out with or without an estate agent, could help to achieve a fair price in line with the market price.
What is the difference between a bidding process and an auction?
In the bidding process, as mentioned above, the bids submitted are not binding and the seller is not obliged to accept a bid. The situation is different in an auction: In this case, the bids of prospective buyers are binding: if a bidder is successful, they must buy the property at the price they have quoted. The seller is also obliged to sell the house or apartment to the highest bidder. Even if this is significantly different from his asking price.
Our expert
KR Georg Spiegelfeld is Managing Director of Spiegelfeld Immobilien and President of Immobilienring Österreich. He founded the company in 1981 and still enjoys working as an appraiser, trustee and estate agent.
Website: https://www.spiegelfeld.eu/de/Home
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