What Is Open Bidding In Real Estate? Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: On This Page
10'000 Hours/Getty Images July 18, 2022 Erik J. Martin is a Chicago area-based freelance writer/editor whose articles have been featured in AARP The Magazine, Reader's Digest, The Costco Connection, The Motley Fool and other publications. He often writes on topics related to real estate, business, technology, health care, insurance and entertainment. Michele Petry is a senior editor for Bankrate, leading the site’s real estate content. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Throughout the U.S., high demand from buyers coupled with continued low inventory has resulted in a real estate market that gives sellers the advantage. This allows sellers to up their prices and accept multiple bids on homes for sale, often resulting in . This process, which is typical in America, is known as “blind bidding” — rival buyers operate in something of a vacuum, unable to see what others are offering. But there is an alternative: “open bidding,” in which all competing buyers know what the others are offering. Open bidding in real estate is popular in other parts of the world, including Australia, and . While it remains to be seen if the American market will adopt open bidding practices, many believe it could be beneficial, making the process fairer and more transparent. It could even help bring down inflated housing prices.
What is open bidding in real estate
Open bidding is a transparent process of that allows multiple prospective purchasers vying for a particular property to know all of the competing bid details — including purchase price, financing and terms. “In an open bidding process, everyone who makes an offer on a property would get to learn about every other offer on that same property,” says Martin Orefice, CEO of Orlando, Florida–based real estate company Rent to Own Labs. “They can learn not just how many other offers have been made, but the amount of each offer and even other details, like how big of a is included, whether it’s or if it’s upon selling a previous home.” Tim Quirk, co-CEO of Boston-based Final Offer, points out that there are different processes for open bidding. In some cases it’s similar to an auction format, in which offers can be made at a set date and time. In others, like the Final Offer platform, real-time notifications are sent to all interested parties when an offer has been made, driving a short competitive event. His company also offers auction-style open bidding in which sellers disclose their committed list price, required terms of sale and an optional “final offer” price; buyers can view all offers and know what it takes to make a higher offer before time runs out. If the final offer option is available and a buyer commits to paying it, they instantly win the home and competitive bidding ends. “Other formats allow offers to come in over a set period and may include a deadline for when the seller can accept an offer,” Quirk says. “And some open bidding processes, like Final Offer, vet buyers ahead of time to know they have the financial means to purchase the home.” Open bidding vs blind bidding
Blind bidding involves submitting an offer on a home for sale without knowing whether any other bids have been submitted, or the competing offer details. The buyer submitting a blind bid also does not know what price and terms the seller is willing to ultimately accept. “Blind bidding is a very common practice in residential real estate — many offers are submitted confidentially to the seller for their review and decisioning,” says Doug Greene, owner of Signature Properties in Philadelphia. “The prospective buyers placing these offers cannot see what others are bidding and, therefore, must place an offer based on their intrinsic valuation of the property.” Open bidding, however, is transparent: All bidders know what the competition is offering and can make decisions accordingly. “With open bidding, buyers can learn that they are competing fairly and on the same terms as all other buyers,” says Nadia Evangelou, senior economist and director of forecasting for the . “Open bidding auctions can also reduce the time involved with purchasing a home, eliminating long negotiation periods. For sellers, open bidding could accelerate the sale of their homes.”
Advantages of open bidding
Open bidding brings more clarity and information to the process, allowing each buyer competing for a home to know what the others are offering. “Buyers can simply make an offer slightly higher than the highest current offer, instead of guessing how much they will have to bid to get their offer accepted,” says Orefice. “Anyone who is close to reaching the limit of their purchasing power for a particular property would be the biggest beneficiary here.” It also streamlines the communication process, allowing for less back-and-forth between parties. Sellers can state their desired price and terms upfront, so buyers know exactly what it takes to make an offer that will be accepted and where they stand throughout the entire process. “This transparency allows buyers to react immediately instead of waiting and hoping that their offer will be accepted,” says Quirk. “Depending on the platform, it can also save time by not having to write offers for their buyers or evaluate and compare offers with their sellers.” In addition, open bidding can save money on both sides of the transaction. The transparent process prevents hopeful buyers from bidding an excessive amount, driven by emotion, that might well exceed the next competing offer — which can lead to overpaying and buyer’s remorse. And if sellers choose to list their property online with an open bidding platform that removes agents from the process, which saves them from having to pay . Disadvantages of open bidding
One of the most significant drawbacks of open bidding is that it has the potential to push prices higher. “When buyers know there is competition for a property, they may be more likely to place a higher bid,” says Boyd Rudy, owner of Dwellings Michigan. “This can be especially challenging for buyers who are already stretched thin financially.” It can swing the other way as well, says Orefice: Open bidding may limit a seller’s profit margin, because when all bidders know everyone else’s offer, it’s less likely that a buyer will make an offer that far exceeds everyone else’s bid. NAR’s Evangelou notes that bidding of any kind creates competition that can drive prices upward, and may put at a disadvantage. “While the U.S. real estate market is already very competitive and home prices continue to reach record highs, this could hurt first-time homebuyers and create another obstacle for them.” First-time purchasers also lack experience participating in a bidding process. If they attempt to bid on a home listed online via an open bidding platform and are not represented by an agent, they may overpay for or lose out on a desired property. Additionally, open bidding can be psychologically tough for the seller. “The seller is , which is a major life event that triggers emotions,” says Greene. “To think that it’s being bid on openly like shares of a stock can really dilute the experience for them.” Is open bidding likely to catch on in the U S
While some companies, like Final Offer, are already providing open bidding platforms in this country, the practice is not yet widespread — or even known — by most sellers and buyers. But some believe it could catch on over time. “As prices continue to rise, more people may feel priced out of the traditional housing market, which could lead to an increase in demand for alternative options such as open bidding,” Rudy says. “Additionally, could make it easier for buyers and sellers to connect, making open bidding a more viable option.” Others are more skeptical. “There are many complexities that would need to be solved and questions that would need to be answered before open bidding could be embraced,” Greene says. “When and how would the bidding information be shared across buyers? Would the process be based on deadlines to avoid perpetual bidding? And do sellers have a right to ask for a best and final offer under the open bidding process? It would be a massive change that requires government support and approval from real estate commissions.” Could open bidding help bring down home prices
Buyers may be less likely to bid aggressively if they know that their offers will be made public, which could result in lower prices, Rudy notes. In addition, wildly over-inflated blind bids aren’t necessary if buyers can see the competition’s offers and raise only enough to win. However, many real estate pros are doubtful that widely adopted open bidding could bring home prices down. “There are too many underlying for open bidding to really make a dent, especially with its tendency to lead to bidding wars,” says Orefice. Bottom line
Open bidding has its benefits, most notably greater transparency — on the surface, it does make the real estate process seem fairer for buyers. It may also lead to faster, more streamlined transactions. While the process has the potential to lead to lower sale prices, it could also lead to paying more for a property than if you engaged in traditional blind bidding, rather than less. Open bidding is not very common in the U.S., so before participating in any open bidding process, do your homework and make sure you know the details of how the transaction works. SHARE: Erik J. Martin is a Chicago area-based freelance writer/editor whose articles have been featured in AARP The Magazine, Reader's Digest, The Costco Connection, The Motley Fool and other publications. He often writes on topics related to real estate, business, technology, health care, insurance and entertainment. Michele Petry is a senior editor for Bankrate, leading the site’s real estate content. Related Articles