"Multiple Offers" are Realtors Blowing Smoke?

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"Multiple Offers" are Realtors Blowing Smoke?

Jim Zatko
Investor · Muskegon, MI · Member since 2014 · 71 posts · 29 votes

I live in Michigan just north of the state line from Toledo, OH. I just flipped and am currently renting out a house in Toledo. And I'm looking for another house to flip. I found one here in Michigan on the MLS in a little town called Summerfield. There isn't a lot of investor completion in this town. Anyway... This house has been on the market for about 10 days or so. I walk through and make an offer yesterday. AS SOON as my realtor contacts the agent to submit an offer, my realtor calls me back and says, "there are 2 other offers that just came in, you need to submit your best and highest offer". Why didn't the agent tell my realtor when she called to see the house? It just seems to me like these realtors, just say things like that to try to make a fake bidding war. It's kind of laughable. I re-cruunched the numbers and offered $2,000 higher. It's still a really good deal. I was just curious if you guys run into "phantom bidders" or houses that have been on the marked for weeks, and all of the sudden have multiple offers when you make an offer?

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Mike Sattem
Investor · La Grande, OR · Member since 2014 · 194 posts · 176 votes
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Hi Jim,

I am a Realtor and an investor and have been in this situation on both sides. I am sure it changes from state to state, but in my locale making any kind of misrepresentation such as a fake multiple offer situation, could result in a fine or loss of license. However, on my personal residence, when I wrote an offer and was told there were multiple offers, I decided to increase my sales price, only to find out that the "other offers" were $20,000 less than my original offer. Long story short I gave the sellers an extra $5K because I got scared. So, trust your Realtor when they say there are multiple offers, but definitely stick to your initial valuation, and do not let your desire to "buy this house" get in the way.

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  • Hillary Van Dusen
    Residential Real Estate Agent · Westland, MI · Member since 2013 · 19 posts · 6 votes
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    I have experienced this also.  I believe it is real, especially if it is bank owned because sometimes there is not a bidding war.  But who knows really.... and I am a realtor.

    0Reply
  • Rob Golob
    Investor · Valparaiso, IN · Member since 2015 · 84 posts · 47 votes
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    In purchasing our personal residence in 2012, we made offers on 2 different houses (at different times) and low and behold, same feedback from Selling Realtor.

    First one was real and we'll never know about the second one.  We got #2 for 3+% over listing.  (Shhh - don't say anything, but my wifr would have gone MUCH higher.....)

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  • Mike Sattem
    Investor · La Grande, OR · Member since 2014 · 194 posts · 176 votes
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    Hi Jim,

    I am a Realtor and an investor and have been in this situation on both sides. I am sure it changes from state to state, but in my locale making any kind of misrepresentation such as a fake multiple offer situation, could result in a fine or loss of license. However, on my personal residence, when I wrote an offer and was told there were multiple offers, I decided to increase my sales price, only to find out that the "other offers" were $20,000 less than my original offer. Long story short I gave the sellers an extra $5K because I got scared. So, trust your Realtor when they say there are multiple offers, but definitely stick to your initial valuation, and do not let your desire to "buy this house" get in the way.

    5Reply
  • Jen Q.
    Real Estate Investor · Houston, TX · Member since 2015 · 5 posts · 0 votes
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    As a realtor and investor, if its just an OK property, I wont change my mind under multiple offer situation. But if I do see a big potential for that property, I would increase my offer to be competitive as after inspection, you always have room to renegotiate the repair costs.   

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  • Jim Zatko
    OP
    Investor · Muskegon, MI · Member since 2014 · 71 posts · 29 votes
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    Thank, Hillary, Mike and Rob. This is very helpful.  Mike I agree, my offer could be 10K higher than the other 2. I didn't get caught up in a bidding war. I offered the absolute highest i'm willing to spend, considering i'm calculating the rehab costing 25K. I don't  want to make my margin so slim and spend 2 months of work and risk for 3K profit. :)

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  • Nick C.
    Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
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    I've offered on properties that have been on the market for over 6 months and gotten the "we have multiple offers, need highest and best" response within minutes. My guess is some realtors are blowing smoke, but some aren't. Depends on the deal and the realtor. The only way to find out is to stick to your guns and see what happens...

    3Reply
  • Jim Zatko
    OP
    Investor · Muskegon, MI · Member since 2014 · 71 posts · 29 votes
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    This house is bank owned, cash only purchase. AS-is, Where-is. Comps are about 100K on the conservative side. And It's list price is 45K. But... It has some issues. I'm guessing the rehab will cost about 25K...

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  • Jim Zatko
    OP
    Investor · Muskegon, MI · Member since 2014 · 71 posts · 29 votes
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    Originally posted @Nick C.:

    I've offered on properties that have been on the market for over 6 months and gotten the "we have multiple offers, need highest and best" response within minutes. My guess is some realtors are blowing smoke, but some aren't. Depends on the deal and the realtor. The only way to find out is to stick to your guns and see what happens...

    I love the the "we have multiple offers, need highest and best" response! I'm like, can't you come up with something else. I'm trying to be more level headed when it comes to purchasing homes. I get to attached to a particular home. I just need to move on, if it's not going to work. I need to be like Mr. Wonderful on Shark Tank, and just tell this house... " You're dead to me"

    3Reply
  • Michael Hicks
    Real Estate Investor · Rossville, GA · Member since 2014 · 218 posts · 96 votes
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    It seems that every house I've offered on in the past year has been this way.  I feel that more times than not, the realtor is blowing smoke.  What are the odds of a house being on the market for three months and then receiving multiple offers at the same time?  I've stuck to my number and won every time so far.  I know one thing...when I list homes, the offers rarely come in that way. 

    3Reply
  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
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    I am a Realtor licensed in MD and DC....and let me just say it is highly illegal to do that in both of my jurisdictions.  Having said that, I am sure that it happens in my area as well as others, but I do not think it happens as much as you think.  The Realtor is not incentivized much to lie in this area.  

    Just to give an example...say the property in question is $100k with the agent making 2.5% of the listing.  And say he has an 80/20 split with his broker then he will make $2,000 from the sale of the property.  If he lies about multiple offers to try to drive up the price...and he gets the sales price up to $110k, he is only going to net $2200.  So is someone going to create a massive legal liability for themselves over an extra $200? Probably not. So I would say in most cases the financial incentive is just not their to lie about their being multiple offers.

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  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
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    Yeah I hear that it is illegal and all but, THERE IS NO WAY OF KNOWING THEY WILL NEVER GET CAUGHT!
    0Reply
  • Nick C.
    Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
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    @Russell Brazil That's a good point. Often times we are offering lower than list price, sometimes much lower. I think the realtors do it more to try to get a number they know the seller will take, as opposed to trying to squeeze a few more commission dollars out of the deal.

    I have no proof, but it wouldn't surprise me if some banks made it mandatory for realtors to reply to any offer asking for highest and best.

    1Reply
  • James DeRoest
    Investor · Century, FL · Member since 2015 · 950 posts · 603 votes
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    Originally posted by @Jim Zatko:

    I live in Michigan just north of the state line from Toledo, OH. I just flipped and am currently renting out a house in Toledo. And I'm looking for another house to flip. I found one here in Michigan on the MLS in a little town called Summerfield. There isn't a lot of investor completion in this town. Anyway... This house has been on the market for about 10 days or so. I walk through and make an offer yesterday. AS SOON as my realtor contacts the agent to submit an offer, my realtor calls me back and says, "there are 2 other offers that just came in, you need to submit your best and highest offer". Why didn't the agent tell my realtor when she called to see the house? It just seems to me like these realtors, just say things like that to try to make a fake bidding war. It's kind of laughable. I re-cruunched the numbers and offered $2,000 higher. It's still a really good deal. I was just curious if you guys run into "phantom bidders" or houses that have been on the marked for weeks, and all of the sudden have multiple offers when you make an offer?

    We've had this a few times. We take a note of the listing agent and never bother with them again.

    Essentially, it'll be something like banked owned, listing with an agent who has an investor in his pocket. He has to list the property, he has to get multiple offers, he then tips off his investor who miraculously puts in an offer $1k above yours, and you're SOL.

    Complete waste of time and energy.

    Last one we did, the guy relisted the property with the same agent and tripled the price. He still owns the property 2-3 years later and it's still empty. I won't get into these "put in your best offer" games as we always get beaten, regardless of what is offered.

    1Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
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    Originally posted by @Jim Zatko:
    Originally posted @Nick C.:

    I've offered on properties that have been on the market for over 6 months and gotten the "we have multiple offers, need highest and best" response within minutes. My guess is some realtors are blowing smoke, but some aren't. Depends on the deal and the realtor. The only way to find out is to stick to your guns and see what happens...

    I love the the "we have multiple offers, need highest and best" response! I'm like, can't you come up with something else. I'm trying to be more level headed when it comes to purchasing homes. I get to attached to a particular home. I just need to move on, if it's not going to work. I need to be like Mr. Wonderful on Shark Tank, and just tell this house... " You're dead to me"

    You know my response mate :)

    "I wish the highest bidder all the best" lollol

    Just passed on a few A class flips today that had easy $20k-$30k profits.

    But still, I don't play games and never bid against myself so decided to not up my offer.

    Keep the dream alive mate

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  • Christine Kankowski
    Real Estate Broker · Temecula, CA · Member since 2014 · 994 posts · 782 votes
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    Hi, I'm sure some agents use this when not true, but  I am honest with buyers when I do have a multiple offer situation.  I had one recently where a house was on the market 4 months with no offer, but then we staged it and did some repairs and all of a sudden we had 3 offers.  I'm sure the agents thought I was blowing smoke, but it was real and they didn't know the upgrades we did by staging, etc.   In any case, 2 of the 3 knew I was for real when I didn't accept their offer.

    The best thing to do is to offer what you feel comfortable with and let the others go. 

    0Reply
  • Jason Allen Taylor
    Specialist · Harrison Township, MI · Member since 2015 · 54 posts · 23 votes
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    I had an offer in on a property in January that came back with a "multiple offer, highest and best" request. I raised my offer by $1200 and got smoked by some guy who bought it for $14k more.

    At that point I figured that I should trust my gut a little more. The next time this happens I think I'll lower my price by $1000 and add a 24hr expiration.

    :)

    3Reply
  • Jim Zatko
    OP
    Investor · Muskegon, MI · Member since 2014 · 71 posts · 29 votes
    11y
    Originally posted by @Jason Allen Taylor:

    I had an offer in on a property in January that came back with a "multiple offer, highest and best" request. I raised my offer by $1200 and got smoked by some guy who bought it for $14k more.

    At that point I figured that I should trust my gut a little more. The next time this happens I think I'll lower my price by $1000 and add a 24hr expiration.

    :)

     LOL, I like that!

    0Reply
  • Jim Zatko
    OP
    Investor · Muskegon, MI · Member since 2014 · 71 posts · 29 votes
    11y
    Originally posted by @Engelo Rumora:
    Originally posted by @Jim Zatko:
    Originally posted @Nick C.:

    I've offered on properties that have been on the market for over 6 months and gotten the "we have multiple offers, need highest and best" response within minutes. My guess is some realtors are blowing smoke, but some aren't. Depends on the deal and the realtor. The only way to find out is to stick to your guns and see what happens...

    I love the the "we have multiple offers, need highest and best" response! I'm like, can't you come up with something else. I'm trying to be more level headed when it comes to purchasing homes. I get to attached to a particular home. I just need to move on, if it's not going to work. I need to be like Mr. Wonderful on Shark Tank, and just tell this house... " You're dead to me"

    You know my response mate :)

    "I wish the highest bidder all the best" lollol

    Just passed on a few A class flips today that had easy $20k-$30k profits.

    But still, I don't play games and never bid against myself so decided to not up my offer.

    Keep the dream alive mate

     That's why they call you the Real Estate Dingo. And they call me the Real Estate Wanker... LOL Just some Aussie Humor.

    0Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
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    Originally posted by @Jim Zatko:
    Originally posted by @Engelo Rumora:
    Originally posted by @Jim Zatko:
    Originally posted @Nick C.:

    I've offered on properties that have been on the market for over 6 months and gotten the "we have multiple offers, need highest and best" response within minutes. My guess is some realtors are blowing smoke, but some aren't. Depends on the deal and the realtor. The only way to find out is to stick to your guns and see what happens...

    I love the the "we have multiple offers, need highest and best" response! I'm like, can't you come up with something else. I'm trying to be more level headed when it comes to purchasing homes. I get to attached to a particular home. I just need to move on, if it's not going to work. I need to be like Mr. Wonderful on Shark Tank, and just tell this house... " You're dead to me"

    You know my response mate :)

    "I wish the highest bidder all the best" lollol

    Just passed on a few A class flips today that had easy $20k-$30k profits.

    But still, I don't play games and never bid against myself so decided to not up my offer.

    Keep the dream alive mate

     That's why they call you the Real Estate Dingo. And they call me the Real Estate Wanker... LOL Just some Aussie Humor.

    lollol

    Rude and Raw mate

    Its not difficult to have more finesse than Engelo haha

    Thanks mate and chat soon

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  • Brent Fleeman
    Investor · Ringgold, GA · Member since 2014 · 86 posts · 13 votes
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    I can honestly say this has happened to me on the last 2 houses I made offers on, and I lost both of them. The first one they were asking 49k for and the winner was at 62k. There was no way I would have went that high but oh well on to my next one.

    0Reply
  • Vivianne Salazar
    Investor · Bradenton, FL · Member since 2015 · 44 posts · 22 votes
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    Same thing happened to us. We were told there were "multiple cash buyers.". My guess is hedge funds.

    0Reply
  • Jeff Zamora
    Investor · San Bernardino Mountains, CA · Member since 2014 · 37 posts · 20 votes
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    I put in an offer on a property that was on the market for 8 months with no price change.  Of course, listing agent almost immediately states there is another offer.  I bumped up offer price 1000 and submitted a note to owner stating what we planned with the house (to personalize the offer).  Got the property. 

    A few years go by, I end up becoming pretty good friends with property seller (he ended up building a custom home in same neighborhood).  Subject of the sale comes up one day, I ask him about the multiple offer issue, and it turns out that he actually did have two offers on that property within a day of each other, after no offers for 8 months.  Offer prices were almost the same so the minor bump made the difference. 

    I try to be less cynical now when I hear 'multiple offers', although I still can't help rolling my eyes...

    1Reply
  • Jesse T.
    Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
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    Originally posted by @Russell Brazil:

    I am a Realtor licensed in MD and DC....and let me just say it is highly illegal to do that in both of my jurisdictions.  Having said that, I am sure that it happens in my area as well as others, but I do not think it happens as much as you think.  The Realtor is not incentivized much to lie in this area.  

    I agree this would be really dumb to try to drive the price above asking price.

    If it is significantly below asking price, there is a risk that the bank will say no deal, so it is a question of the commission now vs. a long delay or even no commission if there is no deal.

    One thing the agent might be doing is holding unacceptable offers and delaying the response.  That way they have "multiple offers" but they really only have one that they are interested in negotiating with.  Or they could consider a verbal offer as "an offer".

    If I increased an offer and felt they may be bluffing, I might be tempted to put a contingency in for some verification of the competing offers.  Revealing bidder info would be a no-no, but there isn't reason to conceal the identity of the agent presenting the offer.

    1Reply
  • Jesse T.
    Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
    11y
    Originally posted by @Vivianne Salazar:

    Same thing happened to us. We were told there were "multiple cash buyers.". My guess is hedge funds.

     I do suspect a lot of these offers are low quality offers that the sellers aren't really interested in countering.  If you have to buy in bulk the way large scale investors do, why not take a shotgun approach with offers well below market prices on a ton of properties.

    0Reply
  • Jennifer T.Pro Member
    Investor · New Orleans, LA · Member since 2014 · 1k+ posts · 944 votes
    11y

    Funny this should come up, I was just looking at a house on the MLS. It is a foreclosure. The very first sentence in the description read, "MULTIPLE OFFERS. Submit best and final offer by May 8, 2015." Except, when I read it, it was almost two weeks later and still an Active Listing.

    At any rate, I talked to my agent, she verified it is an Active Listing with no offers and we are going to take a look at it later today.

    My best guess is maybe they were expecting multiple offers and put in a deadline date...but then got none, lol.  It just seemed a little shady to me to imply there were multiple offers, when apparently there were (probably) no offers.

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