Note: The information provided below does not intend to constitute legal advice. All information and content below are for general informational purposes only.
The pandemic has caused the rental market pendulum to swing wildly, especially in large cities. In the early months of the pandemic, owners and property managers slashed rents or offered two, three, or even half a year off just to bring in new residents.
With COVID rates receding nationwide and back-to-office plans instated, however, renters are moving back to urban centers—and finding themselves stuck in an extremely rental saturated market as rent prices soar once again. In New York City alone, median asking rent is almost 30% higher in 2022 compared to 2021, with rental units averaging $3,200 in asking price.
Renters now find themselves in the middle of bidding wars, offering everything from higher rent to a full year’s rent up front, just to get a spot. Bidding wars are complicated—ethically, legally, and logistically. In this article, we’ll uncover how property managers can navigate bidding wars equitably and carefully in this unprecedented rental market.
What Do Bidding Wars Look Like?
A shortage of rental units coupled with a surge of people moving back to large cities has caused the bidding war phenomenon. Renters are seeking to price each other out by bidding way above listing price. Some renters are even offering to sign longer leases and moving into apartments as-is, offering to paint the unit themselves.
Now, it isn’t uncommon for the landlord to request best and final offers along with an application supporting them.
While bidding for homes is a common practice, fierce competition for rental units is relatively new. And if you’re reading this article, you’re probably experiencing this first hand. While the ball is ultimately in your court as a property manager, let’s talk about how to manage these bidding wars effectively.
How Do Bidding Wars Affect Owners and Property Managers?
The rental market squeeze is affecting everybody one way or another. Building owners are looking to recover from vacancies during the height of the pandemic, while property managers are dealing with extremely high volumes of showings. Agents are showing listings to a multitude of applicants at once, and renters are trying to snag whatever is on the market.
How to Handle Bidding Wars
While you may be tempted to go with the highest bidder, there are several factors you have to consider before signing both a good tenant and at a good price point. Let’s dive into it.
Stick to Your Screening Process
The first step is to create a very clear screening process before you even begin accepting applications. The key to this is to keep your criteria consistent.
Consider measuring factors such as:
- Credit score
- Payment history
- Verification of employment and income
- Criminal background
- Gross income percentage
Ask for references from previous landlords or professional references to help you better gauge which tenant would be the best fit.
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Read our full guide to tenant screening processes for more information.
Keep Rent Within Reason
While the market is unpredictable, it’s important to ensure you’re guiding owners to accept rates that are fair and within reason. It’s also important to communicate openly with tenants and comply with fair housing laws to protect potential renters from discrimination based on race, nationality, religion, familial status, and/or disabilities.
The percentage increase in the rent you may receive will depend on your location and unit, but do some research to see what similar listings are going for. Typically, a reasonable increase may be up to 5% of advertised rent, but that number may increase in even more desirable areas.
Harness the Power of Tech Solutions
If you find yourself in the middle of a bidding war, a property management software solution can help you manage the application and screening process, keep track of bids, and ensure applicants and owners stay informed. Ensure you’re keeping an open line of communication and that the process is well communicated with your applicants. Planning ahead of how you will execute the bidding process is key from the get-go so that you’re building trust and not deterring any potential renters from pulling out as well.
Effective communication, transparency, and planning will help build a healthy long-term relationship with your potential tenant from the start.
Stay on the Right Side of the Law
Bidding wars are allowed on privately owned and run buildings, where rent is unregulated. However, bidding is forbidden on most rent-stabilized or rent-controlled properties. Read about the Fair Housing Act and your local rental laws.
Manage Bidding Wars Fairly
The rental market is reacting to the unpredictability of today’s economy. While you’re navigating through managing multiple bids and evaluating the right tenant for your property, things may change very quickly a few weeks from now.
To summarize, here are a few takeaways you can apply today:
- As tempting as it is to accept the highest bidder, create a clear screening process that sets objective indicators of a potentially good tenant.
- Actively research market rates in your area and price competitively, but within reason.
- Work with robust software solution to help collect and evaluate applications. But most importantly, ensure you’re communicating your process with applicants effectively.
- Read your local rental laws.
Through careful planning—and the right tech stack—you can manage unpredictable situations such as bidding wars.
Learn more about how the right software solution can help you handle whatever the market throws at you.Read more on Marketing