Posted on
June 1, 2023
by
Philip Abtan
Amidst the clamor for change, many prospective homebuyers are advocating for an end to blind bidding, favoring the implementation of an open bidding system. While the idea of open bidding may initially seem enticing for buyers, it often places them at a disadvantage, potentially leading to unintended consequences. Concerns have been raised by homebuyers and the government alike regarding blind bidding and its detrimental effects on the volatility of home prices and the surge in property values. However, embracing an open bidding process may not be the solution it appears to be; instead, it has the potential to exacerbate the situation and propel unforeseen outcomes.
Open bidding entails the disclosure of competing offers to all interested buyers, intensifying the competition. However, this form of bidding can further fuel the rise of housing prices and favor sellers and wealthier buyers. It tends to evoke emotional responses among buyers during the negotiation process, overshadowing rational decision-making and logical purchasing behaviors.
Several psychological factors come into play within an open bidding process. The phenomenon known as "Auction Fever" generates physiological arousal, causing bidders to deviate from their planned bidding strategies. Moreover, "Social Facilitation" influences individuals to behave differently when observed or competing with others in the same endeavor. Additionally, the concept of "social proof" becomes relevant, as people tend to imitate the actions of others without thoroughly considering their own best interests. In an open bidding system, the constant awareness of the latest bid encourages buyers to surpass the previous offer without hesitation. This competitiveness can override rational buying behavior, resulting in buyers paying more than necessary simply to outbid others.
Although transparency is generally viewed positively by most buyers, an open bidding system presents more challenges compared to a blind bidding system and can further inflate housing prices. In a closed bidding system, buyers often harbor concerns about offering significantly higher prices than other bidders, leading to feelings of regret and self-doubt. In an open bidding scenario, these concerns are heightened as the sense of competition intensifies, potentially driving buyers to pay even more if other bidders are similarly affected. Ultimately, an open bidding system would only serve to perpetuate the inflation of housing prices and predominantly benefit the sellers and wealthier buyers.
