Bidding wars and mental health
PerrinAybarra wrote:
Grasshoppa, why is it insane to participate in a bidding war? If you establish a maximum price that you are willing to pay for a specific house and you do not go over that, what is the harm? Are you afraid you might not be able to control what you offer? How is it different than any other time a seller comes back with a counter-offer?
Bidding wars were the topic of my very first entry here at Boston.com/REnow. Since then, not much has changed in the thinking of most would-be buyers. They still need to be warned about how their psychology is designed to work against them when they approach a bidding war.
I am with PerrinAybarra that a bidding war can be handled responsibly. However, most people are vulnerable to what I call “The EBay Mistake.” That’s when the need to win overcomes your critical thinking about what you are doing.
If you want to see for yourself that people behave this way, go to EBay. Choose a “perfect” item, like box of pens. (Perfect, in this sense, means that one box of pens is exactly like another box of pens. It is a perfect comparable, pens = pens.) Watch a couple of auctions and compare to the “buy it now” price for the same pens. It won’t take long to see someone start at $.99 and overpay.
The same thing happens, on a much bigger scale, in a real estate bidding war. Buyers must keep their “need to win” in check. Buyers, if you enter a bidding war, please heed PerrinAybarra’s advice:
Establish a maximum price that you are willing to pay for a specific house and you do not go over that.Maintain control of what you offer
Treat the counter-offer as you would any other counter-offer.
I would like to add and clarify:
By following PA’s rules, you are maintaining your negotiation power by holding on to your will to walk away. That is the key to any negotiation, whether you are bidding on pens or penthouses.
You must ignore the cues that feed your need to win. One of the most harmful sentences in real estate is “On the scale of things, a few thousand dollars is nothing.” If you hear it, repeat to yourself, “This is not the only house in I can live in. This is not the only house in I can live in…” Houses are all different, but almost everyone can find more than one that is “perfect” for them. (Perfect, in this sense, means that it fits your life.)
Have you successfully kept your head in a bidding war? Have you lost your cool and lived to regret it? Who is right about this, Grasshoppa, who says only the mentally ill participate or PerrinAybarra, who says it can be done, with forethought.
