Bidding war on a rental?

Question

We just put our rental up on Zillow, and in the 48 hours that it has been for rent, I have received 32 inquiries and four applications. We have not even showing the place yet. I am now thinking that we could have increased the rent even more than we already did over the current tenants’ rent. Is unethical to screen tenants, narrow it down, and then tell those tenants that whoever Is willing to pay the highest rent can sign a lease?

Patricia Steiner · Answer

It's called false advertising, bait and switch, and a whole lot more of legal liability. You could also set yourself up for a Fair Housing violation should a candidate claim you increased the rent to keep them out due to their race, age, orientation, more.  They don't have to prove it to make your life miserable - the claim alone pretty much makes for a bad time.

Consider that maybe you're getting a lot of interest because you priced it well and marketed it effectively.  The time to determine rent is before you list it.  The way to determine rent is to compare your property to comparable properties and the rent those command.  Interest generated is a sign that you did a whole lot very well.

I recommend renting to the strongest candidate at the advertised rent price.  Have the tenant carry Renter's Insurance with Landlord As Additionally Insured coverage.

Congrats on all the interest. I just read a post from someone who can't attract tenants...maybe he just needs a dose of you.

Best.

Bill B. · Answer

Do we think property sellers should be forced to sell at the price they list on MlS? Is it bait snd switch or false advertising if they ask for offers over list? Should they be forced to take the first qualified buyer that offers list price?

I mean obviously the purchase of a property should be less regulated than a property rental. But it sure seems like a slippery slope if you you can’t ask for more for you rental. Especially if it was listed on the same MLS system as the for sale property.

I can offer $50,000 over list on day 1 with no conditions to buy a property but I can’t offer $200/mo over asking to rent it?

Joe Splitrock · Answer

The laws that govern both are different. Properties for sale are listed at a starting price and it is understood that you make an offer. There is a standardized process and forms. The offer could be higher, lower or the same as asking price. Rentals are advertised at the rental price. It is like going into Walmart after they advertise $100 for an AC unit in their weekly ad. If you got there and they told you due to high demand it is now $120, it would be false advertising. The difference is in how you advertise. If you advertised that same AC unit on Ebay with a starting bid of $100 or listed it as "Make an Offer", then other prices could be offered. If you listed a property for $1000 and said in the listing, we will be accepting best offer by X date, then you could accept offers. In this case they already received applications, so it is too late to change the price, without appearing as a bait-and-switch false advertising scheme. It is bait and switch because the potential tenant applied based on the understanding price was X.

FTC (Federal Trade Commission) regulates advertising and in the case of rental properties, fair housing complaints could come into play too.

In this case it is just an inexperienced landlord not taking time to research value before advertising price. They were happy with X price, as advertised, then got greedy when they saw high demand. Neither inexperience, poor research or greed are valid excuses to change an advertised price. If they had misprinted the price, they could potentially change it. Say the price was $100 in the advertisement but should be $1000. In that case the error is obvious, but they still need to notify everyone immediately of the mistake.

Michael Plante · Answer

Relist at higher rent

Joe Martella · Answer

You can remove the property and relist it at a higher price.  Did you do your research before you listed it on what the market rent is?   You are in the beginning of the month.  So you have a couple days to remove it and relist it.  Don’t know if that would turn prospective tenants off.

Kristi Wolfe · Answer

Thanks for all the varying replies!  We had an Open House style showing yesterday and had a line when we arrived to unlock it!  But- many were Section 8 (we just don’t want to deal with the extra hoops to jump through), 1 was unemployed, 1 wanted to know that day if he could move in…so lots of “noise” but only a couple of really good options.  I looked again at comparable rentals in the area and we were right where we should be price-wise.  So all in all, things went well, we have a signed lease today, and next time we know to maybe increase the rent just a bit higher than we think is right, and if in a few days on the market, it’s not getting much interest, we lower it.  Thanks again!

Will Gaston · Answer

@Kristi Wolfe this is a great learning experience for you on pricing. TONS of landlords have been in this situation and ecstatic because their property is "easy to rent!". It's easy to rent because you're giving it away.

If you're getting that many inquiries it is certainly priced too low. You want the right amount of leads. Too many and it's priced to low. Too few and it's priced too high.

If it were me I would take it off the market and re-list it in few days at a higher price. I don't think there is anything wrong or unethical with that approach.

Joel Miller · Answer

@Kristi Wolfe

I hear it happens in Montana all the time right now

Theresa Harris · Answer

You should have done more work up front.  Sign the best person to a 1 year lease and increase the rent (a reasonable amount) upon renewal.

Bill B. · Answer

They’re defiantly doing high bid wins the rental in Arizona.

https://www.azfamily.com/news/...

When one tenant was told they already had lots of interest he offered $200/mo extra, so they asked their top applicants to offer their highest and best rent.

Bidding war on a rental?

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