You know there are agents out there thinking, “Jim, you sniveling little baby – why don’t you just get your buyers to offer more money so they can win the bidding war?”
First off, a bidding war is when participants are bidding against each other.
What is practiced around here is blind bidding, where buyers just guess at what offer might win.
Nobody wants to pay more than they have to, or more than they should. With no other influence, buyers will submit their bid based on the comps, or their comfort level.
But when presented with a price to beat, emotion takes over. With the fear of losing the property being a real possibility, buyers are much more likely to go higher than they originally thought, in order to win.
It becomes more about winning and losing, than paying a comfortable price.
There will be an occasional blind bid that swamps the boat, and produces a sales price that others wouldn’t have touched. But how do you know? You don’t.
Conducting an auction-like process where bidders are pitted against each other and know the number they have to beat is the most reliable way to reach top dollar. The fear of loss is real, and motivates people to do things they wouldn’t have done on their own.
Yet, realtors around here won’t consider! Why not?
Most everyone thinks it’s against the rules, but this is in the contract:
Offers not necessarily confidential: Buyer is advised that seller or listing agent may disclose the existence, terms, or conditions of buyer’s offer unless all parties and their agent have signed a written confidentiality agreement. Whether any such information is actually disclosed depends on many factors, such as current market conditions, the prevailing practice in the real estate community, the listing agent’s marketing strategy and the instructions of the seller.
Agents can include the confidentiality agreement but it doesn’t mean anything unless all parties agree.
In my bidding war on Saturday, the agents were happy to participate. They enjoyed the transparency, and the chance for their buyers to determine their own fate!
I mentioned the cash offer we made on Saturday on behalf of buyers hoping to purchase a home in Carlsbad. It finally came to a conclusion last night.
It went the same way all of the other multiple-offer situations have gone:
It dragged on for days.
Little or no communication.
No transparency about the process or how a buyer will be selected.
No open bidding.
After a day of being kept in the dark, I suggested to my buyers that we should improve our offer and just hope for the best. We submitted a new offer above the list price, 14-day closing, and free 30-day rentback. A worthy offer!
I got the call late yesterday – Sorry, we’ve gone in a different direction.
I appreciated the call because they usually come by text so the listing agent doesn’t have to offer any explanations. Because I had the agent on the phone, I pleaded with him to give me the winning sales price, which he did.
When I told my buyer about the winning bid, he said,
“I would have paid that.”
“IN FACT, I WOULD HAVE PAID MORE THAN THAT.”
It’s not just about treating all buyers and buyer-agents fairly (part of the Code of Ethics).
It’s about LEAVING MONEY ON THE TABLE, which is happening everywhere because listing agents are too lazy or inexperienced to conduct a proper bidding war. Even if you don’t have the guts to do open bidding like I do, then at least give every buyer a chance to make their highest-and-best offer, which used to be the standard up until this year.
Now, the listing agents only worry about grabbing their favorite offer, and going back to sleep.
You say ‘full transparency’ and blah, blah, Jim – what do you mean? What happened? Give us the dets!!
We received two cash offers during the open house on Saturday, one from the first people who saw it on Friday, and the other from a buyer who attended the open house – which was a quick turnaround because I told her that we already had a cash offer.
Each buyer had their own agent, and the terms were similar. It was going to come down to price.
They are called ‘bidding wars’ in this business, but the way the vast majority of agents handle them, it’s really just a collection of offers. The listing agent might use a spreadsheet to organize them, but in the end, they are presented to the sellers who then just picks a winner – usually after the listing agent chimes in with their preference.
It’s not right that the listing agents get to play God and decide the outcome. I want the market to decide it, because that’s what is fair to all buyers, all buyer-agents, and especially the sellers.
Plus, I don’t want to delay the outcome for hours or days and risk that the buyers might cool off – which is what usually happens as listing agents let days go by after their first offer is received, thinking it might get better, later.
I started my bidding war as soon as I got in my car to leave the open house.
I called the agent for the first buyer and told him he’d been outbid, THEN I TOLD HIM BY HOW MUCH, and asked if he wanted to go higher.
He called back in ten minutes with his new bid.
I went back to the agent for the second buyer and told her that SHE HAD BEEN OUTBID BY X AMOUNT, and asked if they wanted to improve their offer.
My slow-motion auction lasted until one of the buyers ran out of gas about 90 minutes later.
It worked great, and maybe even better than a live auction because bidders don’t feel rushed to make an instant decision. They were able to confer with their agent and make a deliberate new bid.
Both buyers had a fair and clear chance to purchase the home, which is missing with the Offer Collection method. When listing agents just pick their favorite offer, instead of requesting higher bids, it leaves money on the table and it makes the remaining buyers wonder what happened – most of which would have made a better offer, if they were only given the chance.
The seller of our new listing in Encinitas Ranch has been discussing a move for six months. He contributed his decision to sell now primarily to what he read here on the blog.
Specifically, that what appears to be a frenzy slowdown is NOT reflective of the market normalizing – instead, it’s due to just the opposite; a continuing decline of inventory.
What’s my #1 tip for sellers? Sell when everyone else isn’t!
The Encinitas market is starved for higher-end luxury homes, especially those sexy, turn-key ready homes that can be occupied within 30 days (a dearth made worse by most listing agents demanding 60-days free rent after closing for their sellers).
We thought if we went on the market in October and appeal to the buyers who wanted to close and occupy by Thanksgiving, we’d have a special niche all to ourselves.
But we had work to do to maximize the appeal, so we spent the last two months and $50,000 to get the home in tip-top condition. By yesterday, it was perfect – thank you Donna!
What happened next wasn’t luck or happenstance.
It was a planned strategy to maximize the opportunity for buyers to not only purchase a home yesterday, but to also have the process be a fair and clear competition utilizing full transparency. I made sure that everyone knew the rules of engagement, and how to win.
Today, I get to go back in the jungle.
We made a cash offer with different clients yesterday who are hoping to buy a home in Carlsbad, and got the usual routine. Agent doesn’t answer his phone, doesn’t call back, doesn’t acknowledge receipt of the offer until today and leaves a cryptic email suggesting that he might have multiple offers but no other game plan on how the winner will be determined. You know, the normal way agents handle their business.
Full transparency is the best way to achieve top dollar, and you can only find it here!
Kim Rohrer was looking forward to leaving the leaky windows in the two-bedroom Berkeley rental duplex that she shared with her husband and two small children.
The couple recently found a three-bedroom, two-bathroom chalet-style house in Berkeley listed for $799,000, which seemed relatively affordable for the area.
The house needed significant work, including plumbing upgrades, but the couple wasn’t deterred. “It was like a dream house,” said Ms. Rohrer, who works in human resources for a tech company. (Her husband works at the University of California, Berkeley.)
The couple offered well above the asking price: $850,000. They knew there would likely be multiple offers but they also needed to save some money for the necessary repairs. They didn’t get the house.
They didn’t even come close. The home sold for $1.4 million — nearly double its asking price. “It’s terrible,” she says of her house hunting experience so far. “Completely terrible.”
This is a repeat of the 2br house featured on my tour a few weeks ago, with the resulting sales price.
The agent admitted they priced this 2br house low on purpose to attract a crowd, and it worked. The list price was $699,000, and it sold for $1,100,000 cash. Meanwhile, the two other listings around the corner priced at $1,149,000 and $1,200,000 are still unsold.
Sellers are resistant to price attractively, but look how well it works when you Get Good Help!
With no single-family homes in Carlsbad priced under $1,000,000, what do you get at the entry level? Here you go – a 1,350sf condo priced at $615,000 that has drawn several offers, and the bidding war is on:
The percentage of buyers who were willing to pay over list reached another all-time high in July:
NSDCC Detached-Home Sales, % Closed Over List Price
There were 33% of the total sales that closed for $100,000+ over list price!
One out of three!
In July, it was the $1,500,000-$2,000,000 range that was red hot, with an incredible 82% paying over list:
Percentage Who Paid Over List Price by Price Range
$0 – $1.0M
$1.0M – $1.5M
$1.5M – $2.0M
$2.0M – $3.0M
The average and median prices were slightly lower MoM, but the product mix is different every month. Just having the average and median sales prices being higher than the list prices is remarkable enough:
NSDCC Average and Median Prices
# of Sales
Compared to last July, the average sales price was +31%, and the median sales price was +30%!