A friend is trying to buy a house on the east coast, and finds himself in…..guess what…..another bidding war.
He was hoping the listing agent would give him some help.
He asked, “What will it take to win?”, which is a logical question. But of course, the agent told him that she couldn’t answer that question, and for him to make his best offer and let the chips fall where they may. We’ll call that blind bidding.
But isn’t it in the seller’s best interest to administer the most effective process in order to achieve a top-dollar sale? If buyers have a price to shoot at, or some pricing hints, it is more likely they will respond favorably.
An open auction is the ideal solution. The competing bids are out in the open, and animal spirits take over. The environment changes from buyers wanting to pay their price, to doing whatever it takes to win the contest.
We have a long ways to go before open auctions become routine. In the meantime, listing agents can be transparent and help both buyers and sellers.
But agents are only familiar with blind bidding, and just hold out hope that a buyer might go crazy and submit a bid way over the list price – which could happen if the property was deliberately under-priced. But the vast majority of properties are priced at retail – on those, there are multiple offers submitted due to the lack of other quality choices, not because the price is too low.
With blind bidding, offerors will only bid a little higher and hope to keep the purchase price in line with comps. If they don’t know what the other offers are, and are bidding blindly, it is natural for them to be conservative – especially when you consider we are probably in the later stages of our bull market. Buyers are miffed at the lack of transparency, and only add a little extra mustard to their original offer.
As a result, with blind bidding, sellers are leaving money on the table.
Why do we allow this? It’s because it’s the way we have always done it.
Listing agents should provide transparency to buyers, and let the animal spirits take over. Buyers would appreciate the candor, and bid with abandon to win the property.
It’s an old wives’ tale that we aren’t allowed to share the other offers with every buyer. But I challenge anyone to show us where it says that sharing offers is forbidden.
This is at the bottom of our required Form PRBS:
We disclose to every buyer that their offer may not be confidential, and they agree. Why, then, do agents insist that they can’t share the information?
It’s because they aren’t comfortable with conducting a slow-motion auction.
They’ve never done it before, they’ve never heard of it, and it is too easy to just take a blind bid that might be slightly over their list price. That’s good enough, isn’t it?
No, it’s not.
Of course the sellers deserve top dollar, yet we refuse to employ the best strategy to achieve it. Don’t get me started on how many properties we see that are “Sold Before Processing”, where the listing agent tilts the table to avoid any bidding war.
But it is also not fair to the buyers.
How many buyers have you heard say, “I would have paid that much”, after a sale closes. Both sellers AND buyers deserve better…..but are agents going to put in the extra effort?
Get Good Help!
Here are a couple of reasons the marketing of property is historically done that in my opinion. These are my opinions and I do not believe they apply to you, JtR.
First, the issue of transparency has perplexed the real estate industry because the agents want the buyers and sellers to need them to complete the transaction. The complete disclosure would undermine the perceived authority of the agent as the holder of some mysterious knowledge unavailable to the general public. The hidden knowledge is power and the agent wants to control the dissemination of that knowledge.
Secondly, the agent is lazy and doing the old way is easier. That is human nature.
Summed up nicely!
Jim, thanks for raising the bar on honesty and transparency