Bidding wars were all the rage in the hot real estate market of the early to mid-2000s. Buyers would line up to bid more than the asking price, and homes would sell within a day. Fast forward to 2011 and the real estate market is not so hot anymore. In some areas of the country, where high foreclosure rates leave lots of houses on the market, bidding wars seem like a distant memory. There are still many areas, though, that are attractive to buyers and you can start a good, old-fashioned bidding war on your property. (For related reading, also check out Top 8 House-Hunting Mistakes.)

Analyze the Local Market
In order to know how to present and price your property, you need to know what else is out there. Research how many homes are for sale in your local area, what the median pricing is and which types of houses sell the fastest. What drives the price in your area? It could be proximity to water, trendy neighborhoods or good schools. Look at whether most of the houses for sale have agents or are being sold privately. How many are empty or foreclosed? Arm yourself with as much information as you can before listing the house. (Learn where the hot markets are in The Lowest Foreclosure Rates In America.)

Differentiate the Property
This is especially important in real estate markets with a lot of inventory for sale. Why should buyers bid on your house over dozens or hundreds of others? Find your property's unique features and highlight them in the listing. To start a bidding war, you have to convince buyers that your property has features not found anywhere else in the market. Take lots of pictures of the house's features and consider setting up a website just to show off more of the house.

Price Reasonably
It doesn't matter what you think your property is worth. It only matters what people are prepared to buy it for. With a bidding war, buyers often compete to drive the price up over the list price. The key to this strategy is to price it right to begin with. Start with having an appraisal done. Buyers rarely bid on houses priced over appraisal value because they will be unlikely to get bank financing for that much. Over-priced houses also turn buyers off and you may not get any offers. The opening price needs to be attractive to get potential buyers out to see it.

Make it "Homey"
When buyers look at a potential home, they want to envision themselves already living there. With so many empty and foreclosed houses on the market, it's important to make your property look comfortable and "lived in". Even if your house is already vacant, it's worthwhile to rent furniture or hire professional home stagers to decorate. The buyers may have seen a bunch of empty or otherwise uninviting houses. Make yours stand out.

Let Buyers Bump into Each Other
Generate a sense of urgency amongst buyers by letting them know that there is competition. Stage open houses that have been advertised widely. Ensure a good turn out by stacking the deck. Invite friends to come to the open house and look around. The more potential buyers see apparent interest from other parties, the more likely they are to jump in and make a bid.

Manage the Bidding Process
If it appears that you do have multiple parties interested in your property, the real work begins. To get the most interest from potential buyers, set a date by which all preliminary bids have to be in. If there are only two bidders, you will simply go back to the lowest bidder and ask if he or she would like to re-bid. You can continue that process until one of the bidders backs out. If you have more than two bidders, set a second round of bidding with a minimum price of your highest bid in the preliminary round. If no one bids in the second round, you can return to that high bid.

The Bottom Line
Inciting a bidding war on your property can be fun and profitable. The key is to know your market and present your property in its best light. (For additional reading, also take a look at 5 Tips For Recession House Hunters.)