You go to view a property and you read in the sales brochure that the Amsterdam bidding system is used. What does this mean and how does it work?
We’ll explain it using 2 examples.
You make an appointment, a viewing and immediately it appears that you are enthusiastic about the property. You ask the broker about the bidding procedure and he tells you that the Amsterdam bidding system is used. You ask if an opening bid has already been made by anyone. The answer is no. One is still “free. Then you, the viewer, can submit an opening proposal/opening offer to the selling broker. For example, €10,000 below the asking price. Also, in this opening proposal, you will state the conditions under which you are doing this (full financial reserve and a completion in December). The selling party can then provide 4 things back to you:
1. We agree and sell you the property (However, it is not common to do this at an opening).
2. Thanks for your opening suggestion, we choose to negotiate with you. This makes you the 1st bidder and you may adjust your bid 1 more time if you are outbid. However, we are not allowed to tell what was offered by the other(s).
3. Thank you for your opening proposal, we hereby make you the following counterproposal: Amount €400,000 at the same other conditions (delivery time, etc) as in your opening proposal
4. We reject your opening proposal because it is too low and/or the terms are not favorable to us.
In situations 2 and 3 above, you have become ‘1st bidder’. Anyone who comes to look now (the viewings always go on as usual), is told that an opening bid has been made and if they want to bid, then they are only allowed to put down a one-time extreme final offer (and therefore no more 2nd bids).
Now you come to a completely different situation at a completely different home. The selling broker tells you that an opening offer has already been made or that he is already negotiating with one party. You want the property, so what can and should you do? So what you can do now is to make a one-time extreme proposal. Usually this can be done by e-mail to the selling broker. In this you include at least:
- purchase price including buyer costs
- possible reserve of finance
- possible Subject to architectural inspection
- desired delivery date
If your proposal is better than the 1st party he is negotiating with, he will inform that 1st party of this higher offer. The 1st party is now given the opportunity to submit a final proposal. If that is lower than your proposal, then you win the negotiation and buy the property.