In the previous post I mentioned that when I represent sellers, I give price coaching to agents during a bidding war.
What is price coaching? It is giving hints about the competing bids.
Let’s use the Manzanita case for an example.
Once a highest-and-best offer came in above $700,000, I started telling the other agents that it would take more than $700,000 to win. It gives others a number to shoot at, rather than the guessing game that feels like a black hole.
I was also very specific that we were not going to let this linger, that we would select a winner on Monday afternoon, which we did.
Putting parameters around the game helps bidders decide their fate. It is much easier for buyers to say “yes” or “no” to going over $700,000, then to just let them wander around, price-wise.
Once we had three people willing to go above $700,000, I kept giving hints until all bidders said that they had reached their maximum.
This is the opposite of what most agents do. Most agents will put a note in the MLS that says, “there are multiple offers, send in your best offer”. They also make it clear that they aren’t going to tell you how many offers there are, what price it will take to win, or even what their process is to select the winner. This is the sealed-bid method.
The sealed-bid process encourages bidders to offer less than their valuation of the item, because everyone wants a deal, and there is no fear of loss to push them to their maximum.
My method creates the closest thing to an auction/open bidding, which is the most effective way to find top dollar.
There are no rules or guidelines on how agents are supposed to handle a bidding war, so every seller and agent are their own. Get good help!
I guess another concern of the buyer is leaving money on the table by bidding too high to win the deal.
For people who really want the house it seems your way is better. It gives them an idea of where they need to be to win.
I guess by keeping the bids secret you hope someone throws a real high number out there to make sure they are above everyone else.
Shows people need a real estate broker with a plan that is active, instead of reactive. I’m betting, thanks to the downturn, too many realtors are still in reactive mode, and losing money for their clients–and themselves-on both sides of the table.
I guess by keeping the bids secret you hope someone throws a real high number out there to make sure they are above everyone else.
It is simply playing the odds.
There is always a chance that someone comes out of nowhere with a nuclear offer to flatten the competition.
But in this case, as in most cases, all buyers had already made their offer. My coaching technique is to persuade them to go higher.
Most agents just tell all bidders to make their best offer, and after one round they pick a winner.
I go two rounds, which usually means an extra 5%.
This is advanced salesmanship – don’t try this at home!
Great idea Jim. I think it’s ridiculous that the highest bid is some sort of guarded secret. It’s in everyone’s best interest to know what they need to bid to get the job done. It’s good for buyers who really want a house and for sellers to get top dollar.