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Many prospective homeowners know the frustration of being outbid for a house they wanted, but losing the bidding war could actually be a blessing in disguise.
Winning buyers often lost financially when compared to buyers who didn’t, according to a study from the Rochester Institute of Technology. Annual returns for bidding war winners were 1.3% lower on average, and they were also 1.9% more likely to default in transactions where there was a mortgage.
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Soon Hyeok Choi, who teaches real estate finance at the Rochester Institute of Technology, collaborated with other academics to examine roughly 14 million U.S. real estate transactions over the last 20 years. They focused on 30 states and isolated deals where the buyer paid above the asking price, which is generally a strong indicator that a bidding war occurred before the deal closed.
The study based its calculations on “unlevered returns,” which are the returns buyers would generate in all-cash transactions. Although home ownership is a long-term investment for many buyers, bidding war winners kept their properties for an average of only 6.3 years before selling them. When the lower annual returns are factored in, winners overpaid by 8.2%.
Data from the Federal Reserve shows the average sale price of a U.S. home was $512,800 in the second quarter of 2025. Based on the study’s 8.2% overpayment calculation, a bidding war winner will pay roughly $42,000 extra. If they finance the purchase at a 6% interest rate, that translates to over $75,000 in interest payments during the life of a 30-year loan.
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“Perhaps that loss would be worth it to someone who absolutely loves the property,” Choi wrote about the study’s findings for The Conversation, “but we found that homebuyers who purchase after a bidding war are also faster to resell. This suggests their overpayment is based less on enduring affection and more on bidding-war fever.”
The study also showed that the bad kick-on effects of winning bidding wars were heavily concentrated in up-and-coming markets, where lower-income buyers often find themselves overpaying to fight off bids from real estate investors. Buyers who won bidding wars also resold their properties more quickly than buyers who paid below the asking price.
