I’m sure you are familiar with advertised auctions, such as for artwork, antiques, cars, and distressed real estate. But few home buyers anticipate the “unexpected auction.”
This negotiation trick can arise in several ways. One method is where the seller’s listing price for a house or condo is set artificially low below the true market value. The intent of the listing agent “unethical in my opinion” and the seller is to create a “buyer frenzy” of competitive buyers out-bidding each other far above the initial asking price.
Personally, I’ve seen this negotiation tactic used by home sellers who purchased back in 2004 thru 2008 for a price far below today’s market value. They were thrilled with whatever profit they receive.
Another way this negotiation tactic can arise is when more than one buyer becomes intensely interested in buying a house or condo. They are told by the Realtor, “Another buyer is seriously interested in purchasing this home.” More often than not, are only fishing for a good offer. When the seller rejects the initial purchase offer, it may create competition between two or more buyers.
May I suggest, if you discover you are in an unexpected auction, drop out of the bidding. If you really want to purchase the home, submit a written “backup offer” with a substantial deposit check to show your sincere purchase interest. You might be surprised when you’re told the first buyer who won the “auction” backed out and you wind up owning the home.