Are multiple-bidding situations inherently unfair for buyers?

Years ago, multiple bids on a home were not all that common. Certain markets saw them more frequently than others, but most homebuyers were not necessarily competing against dozens of others for the same house.

That scenario has changed in recent years. Housing inventory has been low for a long time, and then the coronavirus pandemic sparked a wave of interest in homeownership, which meant that engaging in bidding wars became an everyday occurrence for many would-be buyers.

Trying to help a client win in a multiple-bid situation is a big challenge, and it's frustrating for both buyers and agents. Multiple-bid situations can feel inherently unfair to buyers, especially if they've been bidding on homes for weeks or months, and they still are no closer to buying a house of their own. And for agents, crafting an offer that stands out among a crowd isn't always easy, especially when you can't share any personal information about the buyer.

Recently, WAV Group conducted a survey of people who tried to buy a house, asking them questions about their experience as it relates to Fair Housing. Here are some early results from the study; the full results will be available soon.

'Did you have a fair chance to win the house?'

With multiple-bidding scenarios becoming increasingly common, we wanted to ask how buyers felt about their own experience with multiple bids. Did they feel they got a fair chance to win the house? And why — or why not?

Just over half of our respondents said they were involved in a multiple-bid situation (50.94%). The remainder were either not involved in a multiple-bid scenario (38.00%) or were unsure how to answer the question (11.06%). These proportions remained when we broke down the results by race between self-identified white respondents and respondents of color.

Almost half of all respondents (46.46%) said that they felt like they had an equal opportunity to win the bid for the house they were trying to buy. This percentage was a bit higher for white respondents (49.33%) than for our respondents of color (45.50%).

For those who did not think they had an equal chance to win the bid for a house, we wanted to dig a little deeper and learn why they felt that way. So our next question asked why they felt they did not have an equal opportunity to win the bids they submitted.

For the most part, white respondents said they didn't win the bid because they were outbid by buyers who could offer more money. Nearly three-quarters (68%) of white respondents cited finances when asked why the multiple-bidding process was not fair to them. Many respondents also discussed the difficulties of competing against cash offers and investors or "flippers" with deep pockets.

The remainder of white respondents either said that the seller already had a favored buyer in mind, or that they got bad advice from their real estate agent.

We saw more variation in answers from respondents of color who were involved in multiple-bidding situations, although almost as many of them (62%) cited finances as the reason why they didn't win the bid. About 6% of respondents of color believed that race played a factor in their multiple-bid situation.

This group of respondents also mentioned competition against investors or buyers who could pay cash, and they were more likely to say that they felt they were not able to purchase homes in certain neighborhoods due to those areas being "out of their league." They also mentioned reasons other than race that could explain why they might not have won the bid, including marital status and other demographic indicators, such as "I'm not professional enough."

Want to learn more about homebuyers' experiences with multiple bids and Fair Housing during the past year? WAV Group's Fair Housing survey report is coming soon!