The process of a potential tenant offering more money than advertised for a rental property is known as ‘rent bidding’.
As at the time of writing, rent bidding is illegal in Queensland though not specifically against the law in other states including New South Wales. As such, real estate agencies take different positions on whether they will accept or encourage rent bidding among potential tenants.
First, let’s take a look at how rent bidding can happen, and our position on this activity.
How does rent bidding happen?
In a competitive rental market, applicants can feel they need to ‘pull out all stops’ to secure a rental property.
The temptation to offer more than advertised can kick in especially if they have been unsuccessful in applying for rentals for some time, are needing to secure a home urgently due to end of tenancy elsewhere, or simply if the property they are viewing is especially desirable.
We have been offered more than the advertised rental price many times by potential tenants attempting to secure the rental ahead of other applicants. Usually this happens during a conversation with the applicant at an open inspection or thereafter. There are even specific rent-auction style apps on the market which some tenants have turned to in competitive markets.
Our position on rent bidding
Once a weekly rental price is researched and agreed with the landlord, this is the price we will list. Many factors go into the determination of the weekly rent, including ensuring the landlord’s financial commitments are considered, the price is well positioned given comparable rentals and market conditions, while also minimising the vacancy period.
In reality, we cannot prevent an applicant from putting forward an offer to pay more than the listed rental price. By way of transparency with our landlords, we will put such offers forward for consideration alongside others.
When a higher rental offer is made, we discuss this with the landlord and encourage the consideration of other factors which are potentially more valuable in the long-term. Quality references from previous agencies, stable and consistent rent payment history, suitability of the home for the applicant’s needs, and much more.
Ethically, we disagree with taking the position that the highest bidder wins. People from all financial positions are entitled to seek and reasonably secure a home to rent, not just the applicants with the deepest pockets.
In fact, accepting the highest offered rent without consideration to other factors can be dangerous. Just as emotion can take over during the auction of a home for sale, emotion can take over when an applicant is – for whatever reason – determined to secure a rental property. We have seen cases where a rental amount has been offered which is clearly not going to be sustainable for the applicant. For example, when the applicant’s combined income is $600 a week and they offer $520 on a rental property.
Importantly, we will never initiate a request for applicants to match a higher offer in order to remain ‘in the running’ to secure the home. This policy has great benefit. Think about it. The applicant offering more may be doing so for reasons other than desire for that specific property. e.g. they may need to find a home to a tight deadline, and may have made higher bids on several properties. Approaching other interested applicants and requesting they match a higher price could result in turning away those other applicants, with the potential that the high bidder may also take another property, leaving the landlord with a vacant rental.
If you need your investment property managed ethically and with transparency of communication at all stages, contact us.
Carnelian Property Management is a family-owned business offering expert rental property management across Newcastle and Lake Macquarie. Their highly accessible and personal approach has delighted Newcastle and Lake Macquarie property investors since 2011.