Wondering if a bidding process is the fastest way to fully realize the value of your property? This method can increase the selling price by 10-15% above expectations, but it also carries risks. We will show you how to strategically use the process to your advantage.
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The topic briefly and concisely
A private bidding process is legally non-binding; only the notarized contract creates facts.
It is particularly suitable for highly sought-after properties to maximise the sale price through competition.
The greatest risks are the withdrawal of bids and deterring conservative buyer groups.
Selling a house is a decision with significant financial implications. The private bidding process promises to speed up the process and achieve the best possible price through competition. Unlike an auction, the bids are not legally binding, which creates a unique dynamic for both buyers and sellers. This article guides you through the strategic stages of the process, highlights the crucial advantages as well as the often overlooked disadvantages, and provides you with a clear, data-driven basis for decision-making. Learn how to maintain control and optimise the outcome.
What distinguishes a private bidding process from an auction
A private bidding process is a sales strategy, not an auction. Unlike an auction, where the highest bid is legally binding, as a seller, you retain full decision-making freedom. You are not obliged to accept the highest bid, or any bid at all. This flexibility is the core of the process and protects you from selling below value. The process is often used in situations of high demand to efficiently determine the market price and can shorten the sales process from several months to often just 4 to 6 weeks. It is about realising the true market value through targeted competition. Legal binding only arises with the notarisation of the purchase contract, which provides you with security until the end. This method requires transparent communication to gain the buyers' trust, thus laying the foundation for successful price formation.
The Process: Achieving Success in 5 Strategic Phases
A structured approach is crucial for the success of the bidding process. A typical process takes between four and eight weeks and can be divided into five clear phases:
Preparation and Assessment: A realistic starting price is psychologically important. A professional property valuation prevents interested parties from making unrealistic low bids. A detailed expose with explicit mention of the bidding process provides transparency from the start.
Marketing and Exposé: The property is widely advertised on portals, but usually without a price to maximize interest. All relevant documents must be complete and easily accessible for potential buyers.
Organizing Viewings: Usually, open house viewings are scheduled to make the competition visible. Often, 10 to 50 potential buyers attend such appointments. Individual appointments remain an option for serious interested parties with proof of financing.
Bidding Phase and Communication: A clear deadline for submitting bids, typically 2 to 4 weeks, is essential. All bids should be submitted in writing via email. Whether to inform the bidders of the current highest bid (transparent bidding round) is a strategic decision.
Decision and Notary Appointment: After the deadline, you review the bids. You choose not only based on the highest price but also on the buyer's creditworthiness and reliability. The acceptance of a bid remains non-binding until the purchase contract is notarized.
Each of these steps must be executed precisely to minimize risks and maximize the sale price.
Maximising Potential: The Benefits of the Bidding Process
The biggest advantage of the bidding process lies in price dynamics. In a market environment with high demand, the achieved sale price can exceed the originally estimated market value by 10% or more. Time is another critical factor; the entire sales process can often be completed in under two months, whereas traditional sales often take up to six months. You also avoid lengthy and exhausting price negotiations with individual buyers. The competition handles the negotiation for you. Especially for properties that are difficult to value, such as properties in need of renovation in prime locations, this method is ideal for allowing demand to determine the price. Control always remains with you, as you do not have to accept any offer. This method offers an efficient alternative to the traditional sale without an agent.
Managing Risks: The Drawbacks and How to Avoid Them
The lack of commitment is the biggest weakness of the process. A bidder can withdraw their offer at any time up to the notary appointment without consequences. This leads to planning uncertainty, which causes up to 20% of sales attempts to fail. Another disadvantage is that the format can deter some buyers. Conservative, financially strong buyers often prefer a fixed price and do not participate in bidding procedures. There is also a risk that only "bargain hunters" will respond, with bids far below market value. Counter this with a professional appraisal, which you use as a reference. To minimize the risk of withdrawal, you should request financing confirmation from favoured bidders early on. Transparent communication about the process helps to build trust and control the risks in selling a house.
The legal framework: Why an offer is not yet a contract
Under German law, a real estate purchase is only valid through a notarised purchase contract (§ 311b BGB). The private bidding process is merely an 'invitatio ad offerendum' – an invitation to submit offers. No bid, no matter how high, obligates you to sell or the bidder to buy. This protects both parties from hasty decisions. All agreements are legally non-binding until notarisation. Ensure that all process steps are fair and transparent to avoid legal disputes. Providing all bidders with the same information is crucial. Never agree to reservation fees or preliminary contracts without notarisation, as these are generally ineffective. The clear legal distinction between bidding and contract conclusion is a key feature that you should strategically utilise.
Conclusion: A strategic tool rather than a cure-all
The private bidding process is an effective tool for selling real estate, but it requires a precise strategy and preparation. It is ideal for sought-after properties where you are aiming for a quick sale and maximum price. Success largely depends on a realistic assessment of the market and a transparent execution. The non-binding nature of offers remains the greatest risk, which needs to be mitigated through careful selection and examination of bidders. Ultimately, a data-driven valuation is the basis for your success. Do you know what your property is really worth? A neutral AI-supported evaluation by Auctoa or a conversation with our ImmoGPT can provide you with the necessary confidence in just 2 minutes before you begin the process. Make your decision based on facts, not on a gut feeling.
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Additional useful links
Statistisches Bundesamt (Destatis) offers data on construction prices and the real estate price index in Germany.
Deutsche Bundesbank provides an indicator system for the residential property market.
Wikipedia explains the bidding process in the real estate sector.
BORIS.de provides information on standard land values in Germany.
Verband deutscher Pfandbriefbanken (vdp) publishes the vdp real estate price index on price developments in Germany.
Bundesverband freier Sachverständiger (BVFS) is the association of real estate appraisers.
Deutscher Sparkassen- und Giroverband (DSGV) offers a position paper on the real estate market.
Institut der deutschen Wirtschaft (IW Köln) publishes studies on the development of the real estate market, such as the setback in sentiment in the 3rd quarter of 2024.
FAQ
What is the main difference between a bidding process and an auction?
The main difference is the legal binding. In an auction, the acceptance of the highest bid is a legally binding contract. In a bidding process, all bids are non-binding until the notarisation of the purchase contract.
What type of properties is a bidding process most suitable for?
The process is best suited for properties in sought-after locations with high demand. It is also ideal for unique or hard-to-value properties (e.g., those requiring renovation in a good location) as the market determines the price.
How long does a typical bidding process last?
A well-structured bidding process typically lasts between 4 and 8 weeks from marketing to the end of the bidding period. The subsequent notary appointment depends on the availability of the parties involved.
Can I set a minimum bid as a seller?
Yes, you can set a minimum bid and communicate this in the property listing. This can help to avoid unrealistically low offers from the outset, but it could also deter some potential buyers.
What happens if the highest bidder withdraws their bid?
Since the bid is non-binding, it has no legal consequences for the bidder. As a seller, you can then contact the second highest bidder or restart the process.
How can Auctoa assist in a bidding process?
Auctoa offers an objective, AI-supported property valuation. This data-driven analysis provides you with a realistic market value and a solid foundation for deciding whether a bidding process is suitable for you and what the minimum bid should be.
