Bidding wars may seem like a simple matter of numbers, but they’re driven just as much by human behavior as they are by market data. When multiple buyers are interested in the same home, emotions can run high, decisions are made quickly, and logic sometimes takes a back seat.
If you’ve ever wondered why buyers are willing to go over asking price or waive key contingencies, the answer often lies in psychology. Let’s take a closer look at what fuels bidding wars and how buyers and sellers respond to them, from someone that has seen plenty.
1. Scarcity: the fear of missing out
When buyers perceive that a property is rare or that others are interested in it, they often react with urgency. This is known as the scarcity principle. It’s the same logic that makes limited-edition items sell out in minutes or causes long lines at a trending restaurant.
And let me tell you: In real estate, especially in Sarasota’s most sought-after neighborhoods, scarcity is real. Waterfront homes, properties near downtown or in walkable areas, and fully renovated homes in classic communities like Southside Village or Laurel Park often attract multiple offers.
When buyers realize that others are competing for the same home, their fear of missing out often leads them to make bolder, quicker offers than they initially planned.
2. Anchoring: the emotional pull of the list price
The list price creates a psychological anchor. Even if buyers know the home will go above asking, they often use the list price as their emotional benchmark. When someone offers $25,000 or $50,000 over asking, it feels like a stretch, even if the home is objectively worth it.
This anchoring effect also causes buyers to feel “behind” when they hear another offer has already exceeded asking. It pushes them to play catch-up, often resulting in quick escalation. Even rational, financially savvy buyers are not immune to this mental shortcut.
3. Competition triggers emotion
Buying a home is a personal experience. You imagine a life in that space, where you’ll have coffee, celebrate birthdays, or host Thanksgiving… When another buyer threatens to take that away, it becomes emotional.
Bidding wars activate a competitive instinct. Even buyers who begin the process saying they don’t want to overpay can find themselves swept up in the energy of trying to “win.” At that point, it’s less about the house and more about not losing to someone else.
4. The sunk cost fallacy: “we’ve come this far”
After spending weeks or months touring homes, writing offers, and getting pre-approved, buyers become emotionally and mentally invested in the process. By the time a home feels like “the one,” there’s already a lot of energy behind it.
This is when the sunk cost fallacy can kick in. Buyers don’t want to feel like all their efforts have been wasted, so they’re more willing to increase their offer or make concessions they wouldn’t have considered at the beginning. They feel committed, even when walking away might be the better financial choice.
5. Risk-taking increases when emotions run high
It’s common to see buyers waive inspections, offer appraisal gaps, or agree to non-refundable deposits during bidding wars. These decisions are driven by emotion and the adrenaline that comes with competition.
In hot markets, this behavior is normalized. But from a psychological perspective, it reflects a shift in risk tolerance. Buyers are willing to accept more risk to secure a home they’re afraid of losing.
In Sarasota, especially in high-demand areas like Lido Key, West of Trail, or Siesta Key, this pattern is increasingly common. The key is making sure any risk taken is a calculated one, not purely emotional.
6. Sellers have psychology too
It’s not just buyers who are affected by bidding wars. Sellers often react emotionally to the offers they receive. A strong offer can validate their sense of the home’s value or signal that their pricing strategy worked.
Sometimes, sellers favor offers that come with personal letters or are presented by agents who communicate clearly and respectfully.
Other times, sellers become overconfident when they receive multiple offers, which can lead to unrealistic counteroffers or the belief that they can always do better by waiting.
The simple reality is that bidding wars are as much about emotion as they are about economics.
When competition enters the picture, people think differently.
Kelli Eggen
