Is overbidding by a real estate buyer allowed?

Outbidding may seem straightforward to a buyer firmly resolved to obtain an apartment. However, it is not customary in the French real estate market. It raises a number of questions: is it legal? What are the consequences for the seller and other buyers? Does a seller have the right to accept a higher bid?

What is a higher bid?

The difference between a higher bid and a genuine overbid

When selling a property, an interested buyer makes an offer to purchase, indicating the price he or she is prepared to pay. When a buyer sends an offer at the selling price proposed in an advertisement, it can be assumed that the sale has been concluded.

Overbidding occurs when a second buyer proposes a price higher than the advertised price, in order to convince the seller to sell him his property and not give in to the first offer. This is to be distinguished from a simple higher offer at the start of negotiations.

Situations where overbidding can occur

Overbidding occurs when demand is high and supply low:

• Particularly in certain sought-after areas of major cities, such as the Marais district and Paris's 6th and 7th arrondissements.
  
• Rare or exceptional apartments: apartments with terraces, views of monuments or the city, particularly well laid-out, quiet and sunny properties.
  
• When the apartment is offered at an attractive price: properties that are undervalued in relation to market prices will attract many buyers and arouse covetousness.
  
• Tight real estate markets: buyers will adopt more aggressive strategies to get the apartment of their dreams.
  

A concrete example of an overbid transaction

A young couple is looking for a two-bedroom apartment in the Villiers district of Paris' 17th arrondissement. They wanted an apartment with an elevator, a nice view, sunny and quiet. After several months of searching, they found the perfect apartment. They decided to make an offer very quickly at the asking price (€945,000), without negotiating. Their financial file is solid. They have no doubt that they will become the owners of this beautiful apartment.

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However, the next day, another buyer, hearing that an offer at the asking price had been made, sent a higher bid. He offered €965,000, i.e. €20,000 more than the advertised price. Does the real estate agent have the right to receive this offer and pass it on to the seller? Can the seller accept an offer higher than the asking price and refuse the first offer?

This case illustrates perfectly the situation of overbidding in a real estate transaction and the tensions it can create between buyers, sellers and the real estate agent.

French legislation: is outbidding legal?

The current legal framework

In France, real estate sales are legally regulated to protect both buyers and sellers. When a buyer makes an offer to purchase a property, even at the asking price, he is expressing his intention to buy at a given price. However, this offer is not binding on the seller if the sale is made through a real estate agent. The seller is free to accept or refuse the offer and negotiate with another buyer.

When the sale is made directly between private individuals, an offer at the asking price is legally binding on the seller. However, case law considers the sale of real estate to be a complex operation. An offer to purchase at the asking pricecould therefore be seen as a simple invitation to enter into negotiations, and not as a completed sale.

Acceptance of a purchase offer by the seller

When the seller accepts a purchase offer in writing, the situation changes. The seller is theoretically committed to selling his property to the buyer, and can no longer accept another offer to purchase, even on more advantageous terms.

Overbidding by the buyer

The overbidding situation, i.e. a buyer who offers a higher price than the seller's asking price , can occur in a sale between private individuals or in a sale with a real estate agent.

Overbidding in the presence of a real estate agent

In the vast majority of cases, the mandate to sell is a mandate that only allows the real estate agent to introduce potential buyers to the sellers. In this situation, a seller who receives an offer to purchase, even at the asking price, has the choice of accepting it or not. If a higher bid is proposed by a buyer, the real estate agent must pass it on to the seller, who is again free to accept or reject it. It should not be forgotten that once the seller accepts a purchase offer, he is committed to the buyer and cannot accept another offer, even a more advantageous one.

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Outbidding between private individuals

The situation is different here, as an offer at the asking price in a private sale is binding on the seller. In theory, he cannot refuse it. Case law, as we have already mentioned, does not simplify the situation, considering that the sale of real estateis a complex sale. So, is outbidding allowed between private individuals? Theoretically, no. In practice, it could be up to the courts to decide.

Advice for sellers wishing to outbid

If you are in the presence of a real estate agent, don't hesitate to bid higher if you wish - it's perfectly legal. The seller will then be free to accept your offer or not.

If the seller is selling his property directly, we don 't advise you to outbid him, as the legal situation will be unclear.