What happens in a bidding war?

jane__nyOctober 6, 2009

Multiple offers. Buyers are told to submit their 'highest and best.' All offers are below what the seller wants. What happens after that? Is the seller forced to accept the highest bid? Are all the deals off or can they renegotiate?

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sweeby

Seller has two offers and can accept, decline or counter as he sees fit. However, having already been asked to submit 'highest and best', I wouldn't expect much movement on price from the potential buyers.

You may be able to be get agreement on a request to improve the terms of some non-price element -- closing date, shorter inspection period, more earnest money...

    Bookmark   October 6, 2009 at 3:58PM
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linda117117

Jane the seller is not "forced" to do anything.

If neither one of the offers is "what you want", you can choose to offer a counter to see if either party will go higher. Both may choose to do nothing since supposedly this was "their highest and best".

I would recommend, however, that with two offers on the table, this is your VERY BEST chance to get the best offer. Take one of them. What you want may not be what the market value is on the home.

    Bookmark   October 6, 2009 at 9:40PM
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sweeby

I wanted to add that with two interested buyers, each submitting 'highest and best', what you are probably getting is an unusually accurate picture of 'fair market value' right now.

If these offers aren't good enough, I'd reassess your expectations...

    Bookmark   October 6, 2009 at 10:02PM
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jane__ny

It's three offers. I lowered the price a few weeks ago. The buyers had seen the house when it was priced higher. They reappeared last weekend. I received one bid and it was low. Before anything happened, the two other couples were going to bid. My agent told them the first offer was refused because it was too low. She told all three couples to offer their highest and best. I have no idea what will be offered at this point. Just wondering how it works from that point.

Thanks,
Jane

    Bookmark   October 6, 2009 at 10:26PM
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terriks

It seems to me that your agent should have explained it to you.

    Bookmark   October 6, 2009 at 11:10PM
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chispa

Will it appraise at the price you would like to get? You can't just look at price ... what are the other terms of the offers.

Also, be very carefull in multiple offer situations, many buyers (like myself) do not like to play this game. I might give it a go, but if I keep getting pitted against the other buyers I will back out of the deal. You might then end up with no buyers.

    Bookmark   October 7, 2009 at 6:16AM
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Billl

If you already had to lower the price, I think that is a pretty good indication that you had an unrealistic view of the value of the house. I'd personally take the highest/best offer and run. Multiple offers at the same time usually represents your best chance of getting the best sales price.

If you don't want to sell for what the market has priced your house at, that is up to you. An offer is just that - an offer. If you don't like the offer, don't accept it.

    Bookmark   October 7, 2009 at 11:24AM
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eastgate

Jane, what percentage did you lower the price? I'd love to have 3 offers at once.

    Bookmark   October 7, 2009 at 12:16PM
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creek_side

Interesting thread. This is first time I have seen the term bidding war applied to offers below the asking price.

    Bookmark   October 7, 2009 at 1:56PM
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jane__ny

I lowered it by 4.4%. Seemed to set off a flurry of activity. I lowered it enough to bump it down to a different 'search amount.' Brought in a lot of interest. It seems most people search by $100,00 increments, so these people were shooting for the low end of the price range. I'm not refusing anyone at this point. The first offer was a real low-ball and I didn't want to respond at all. Agent convinced me to throw out a figure, which I did.

Appraisal is iffy. Depends on the comps and they are a mixed bag.

I'm just waiting.

    Bookmark   October 7, 2009 at 2:39PM
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chrisk327

Yeah, same here, hard to say its a bidding war if you're not happy with any of the bids.....

Hopefully for you, they'll come up to your number.

You are never required to sell your house until you actually are at the closing table. there aren't any penelties until you have a fully signed and executed contract.

Hopefully your agent conveyed to the other agents some indication as to your displeasure with their numbers.

just ssaying highest and best may bring up the price a bit to beat out a few other people, but if you're far off something additional should be communicated.

    Bookmark   October 7, 2009 at 3:27PM
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landmarker

My advice is all offers you get should be countered. I did what you did (refused to counter) and got burned badly. When you get an offer counter them until you both agree on a price. In NY you are then free to walk before the contract is signed which occurs after the inspection (far in the future in your case)

Regarding the best and highests strategy.. I don't think that is a good idea in this market. Why? Inventory is so high no buyer will want to get into a bidding war. I would negotate directly with each offer (through your agent)... But given you have 3 offers you have a great position of strength... I think you will get your best price this way, if your agent basically works the phones.

    Bookmark   October 7, 2009 at 4:20PM
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susana_2006

During the crazy bidding wars in Los Angeles four years ago, my realtor told me that the price that they offer is meaningless. Unless it is a cash offer (and none were) the house would be appraised and the price would be re-negotiated. This was of course in the days of above-asking price bids.

So if those making offers will need loans, the appraisal will be really important. The agent should be checking out to see if they all will be able to get the mortgage loan.

Good luck
Susan

    Bookmark   October 7, 2009 at 9:16PM
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ncrealestateguy

Jane,
If they sent you thier "highest and best", then you either have to choose one of them, choose none of them, or try to renegotiate one of them.
In this state, you are not allowed to "Round Robin" the buyers against each other. You have to ask for highest and best, and then negotiate with the best one. (RE agents are not licensed for auctioneering) If you really do not like any of the offers, choose the best one, and let them know that you want to work with them, but that a couple of terms need tweaking... They either say No, or OK.
Also, when you asked for the buyers to bring thier highest and best, you could have stipulated that all offers need to be at least at a certain price.
Either way, you are definately staring at the real market value of your home. It would be wise to get into a contract with one of them.

    Bookmark   October 9, 2009 at 8:47AM
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bethesdamadman

I can tell you how it worked in my situation. We put our house on the market two weeks ago on a Thursday afternoon, with an open house on Sunday. By Monday, we had received two offers, but my agent had fielded calls from other interested agents. She told them that they had until 3:00pm Tuesday to get their offers in and that we would be considering all offers that afternoon @ 4:30pm. We ended up with a total of five offers, two of which had escalation clauses. The offers ranged from $15k below listing price to $50k above. Even so, my agent was still on the phone trying to get the bidders to sweeten their offers as we sat in her office with all five offers in front of us.

This all came as a complete shock to us. We had put our house on the market three years ago almost at the height of the bubble and had barely a trickle of showings and no serious interest during the two-month period it was on the market. (We took it off due to my health issues at the time.) Given that history, plus the fact that it had been on the market for eight months when we first bought it, we assumed that it would take at least several months to sell this time, so we put it on the market now in anticipation of it selling early next year when I will be retiring. Given that it sold in five days, it is now obvious that in retrospect our house must have been over-priced back in 2006.

We had to scramble to find a short-term residence so that we'll have some place to live for a few months until I'm ready to retire and leave the area.

It is now plainly obvious that a house will sell if it is priced right, housing slump or no housing slump. Our house sits on a very busy commuter street, and the state wants to build a mass transit light rail line on the hiking/biking trail that is adjacent to our house. Moreover, our house has polybutylene plumbing, which was the subject of a lawsuit 15 or so years ago and is no longer manufactured. All of this was not only disclosed, but emphasized to all of the bidders, yet the house still sold above asking price in five days.

And lest anyone think that we had to give our house away, we sold it for $435,000 more than we paid for it 11 years ago.

So there is hope, people. Price your house correctly and the buyers will come.

    Bookmark   October 10, 2009 at 4:25PM
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terriks

Congrats bethesdamadman! What was your asking price compared to 3 years ago?

    Bookmark   October 10, 2009 at 6:09PM
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xamsx

Congrats bethesdamadman!

I wanted to make a comment about Designed to Sell but my snark wasn't coming across well. Did you turn the rooms back before you sold, or were they still the same as when the show left?

    Bookmark   October 10, 2009 at 6:40PM
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bethesdamadman

The price was almost exactly 1/3 less than three years ago, but as I noted, we were obviously waaaay overpriced back then. Not only didn't we get any offers, we only had a few showings. The agent wasn't sure how to price it, so he did the caravan thing with other agents in his office and asked them what price it should be. There was a $500k difference between the high and low, and we went with something in the middle.

I thought we had very little interest because of our location on a busy street; obviously it was the price.

As for HGTV, we did leave the rooms just as they were. In fact, the buyers have asked to purchase the furniture in the bedroom and the "tea room."

Coincidentally, our episode will be rebroadcast again the day before we close. It is scheduled for November 12 at 1:00pm.

    Bookmark   October 11, 2009 at 7:17AM
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manyhosta

Congrats, Bethesdamadman, and thanks for letting us know how things turned out with your home. Hope you are fully back to good health.

Jane, how are you doing with the negotiations?

    Bookmark   October 11, 2009 at 10:58PM
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