Has anyone ever been a Listing Agent during a bidding war ?

21 Replies

What am I doing wrong? Has anyone ever been a listing agent during a bidding war. As an investor I have put in a few offers towards foreclosure properties I wanted to flip. My last offer included an escalating clause that I thought would beat out my competition but I still lost the bid. What am I missing? In your experiences, who usually wins these bids and what are they doing to come out on top?

Thanks in advance,

Vernell :-)

If you are dealing with Asset Managers they have been asked to reject those offers. In other words, it might be legal in your state. They go after the highest and best and counter back top 10 bidders at least one or several more times until one really stood out to make profit out of a potential loss. Often the bidders now have to pay listing agent commission to purchase. I have turned them down routinely in traditional sales. Many final sales are 6 figures higher than second highest with no contingency.

Hey @Vernell D Watson , you've just got to stay persistent. I've listed many properties that wound up in "bidding war" situations, that's just the market that a lot of places are having these days. Three thoughts for you:

1. To answer your questions, a strong down payment, seller-friendly terms, and - I hate this last one for many reasons - being represented by the listing agent, all can contribute toward having an offer accepted. 

2. Stop it with the escalation clause, that's a terrible, terrible idea. You're exposing yourself to a lot of risk there, depending on your state's real estate laws. And even more importantly, how the hell are you supposed to know and control your numbers on a potential flip property when you don't even know what your maximum offer is!? I'm ending my rant, but seriously. Knock it off.

3. Are you using an agent? If you're not, you should be. If you are, ask them for their advice - at the end of the day, a good agent will know what it takes to win a listing. It's not rocket science, it just takes persistence.

Keep up the good fight man! You'll get one soon.

@Nick G. Thanks Nick, I shouldn't have left out the fact that when we used an escalating clause we had a cap on it. This was just in case someone over bid for the property :-) However, I will remain persistent and thanks for the advise. 

Vernell

@Vernell D Watson Alright, escalation with a cap makes it better from a risk standpoint, but it makes it much worse from a negotiating standpoint. If you tell a seller you're offering them $100,000... buuuut, you're willing to go up to $115,000 in a pinch... all you're telling them is that your offer is $115,000, and to a seller, the negotiating starts at that number. Make sense?

Good, stay persistent! Good luck to you.

@Nick G. Uh? No Nick, maybe I should have posted the clause so you could see it. When we use an escalating clause and we start with lets say 100K and we cap it at 120k. If the seller later says we won the bid at 120k he has to furnish us with all the other bids that caused our initial bid to rise. So although it says our highest is 120k the seller has to provide proof from other bidders. Make sense?


Thanks :-)

Its simple , come in at your highest and best from the start . If you lose , move on to the next .  you cant lose money when you dont get a property , only when you pay too much for one

Originally posted by @Vernell D Watson :

@Nick G. Uh? No Nick, maybe I should have posted the clause so you could see it. When we use an escalating clause and we start with lets say 100K and we cap it at 120k. If the seller later says we won the bid at 120k he has to furnish us with all the other bids that caused our initial bid to rise. So although it says our highest is 120k the seller has to provide proof from other bidders. Make sense?


Thanks :-)

It kind of makes sense to me, but it also doesn't - but maybe that's typical in your area and I don't know what I'm talking about. 

If I'm a seller, and your offer is competing with other strong offers, that language may actually annoy and disincentivize (is that a word?) me if I've got other strong offers close enough to yours. Maybe try it a few times with and without and see if you have better luck? Either way, keep it up.

@Vernell D Watson highest and best offer, all cash, no inspection contingencies. All cash can be a HELOC or some other line of credit. The seller doesn't want financing contingencies and often even takes a lower offer if it is cash. I have never tried an escalation clause, but I suspect in many cases they just want your highest and best.

The most common result is that the highest offer wins the bid. But not always.

How big was your deposit?

Did you give a firm offer or did you have any conditions?

Do you know how much the winning buyer paid?

Yes, you may be able to pay a bit less than someone else if you go through the listing agent. But it probably won't be a big difference on a $120,000 house.

Do you know the best closing date for the seller? Did you give it to them? (I assume they want it closed fast if its a foreclosure.)

A couple things I do:

-I often go to multiple offer presentations with a bank draft for the deposit of at least 20% of the purchase price.

-Firm offers (no home inspection condition) also have the upper hand. I sometimes pay for an inspector before the offer date. And sometimes (not too often) I'm comfortable to go firm based on my own inspection. Often sellers will choose a slightly lower price that is firm, rather than a higher price that is conditional.

Originally posted by @Nick G. :

@Vernell D Watson Alright, escalation with a cap makes it better from a risk standpoint, but it makes it much worse from a negotiating standpoint. If you tell a seller you're offering them $100,000... buuuut, you're willing to go up to $115,000 in a pinch... all you're telling them is that your offer is $115,000, and to a seller, the negotiating starts at that number. Make sense?

Good, stay persistent! Good luck to you.

when I have been successful with escalation is when they ask for highest and best .. I then offer a tad higher then I put that I will pay X amount over the next highest bid.. with or without a cap depending.

you have to size up your competition.. in some markets 500 bucks is a lot of money and you can get it for small change.

I won one in Charleston SC this way.. and we are closing next week and made a substantial profit.. so to pay a couple grand more was smart move..

I am thinking if your getting out bid it could be other issues like do you have the cash in the bank. if you need financing and or HML and the competing bid is ALL cash with a checking account with proof of cash in the bank.. most sellers will take that one first and many will take it even if its a tad less ( I know I would)

Hope that helps a little. 

90% of properties I list I get multiple offers.

What increments are you escalating in? If the increment is small....then the other terms become much more important.  You need to escalate in large amounts to make your offer enticing over the 2nd place one.  

For instance someone bids up to $400k, but has a 7 day close and all cash, no contingencies...and you have bid $1,000 over 2nd best to get to $401k, but you have a home inspection, financing, inspection contingencies and a 30 day close. Which offer would you pick? In this instance you would likely need to be somewhere $15k over the 2nd best offer to win. 

@Joe is right.

Cash highest offer and no contingency is the key to win the bid.

Last 2 weeks, I made only 6 cash offers, I won 4 offers and will be closing in 2 weeks.

One of the 4 winning offers, I was the 2nd highest bid, but the listing agent counter me to match the other person highest loan bid offer. The seller likes my cash offer and no contingency.
I said ok, I will match the highest loan offer, which is $5k more. I won the bid.

Another example of Cash is the king.

Just sold a house with multiple offers

I wouldn’t bother looking at an offer with escalation clause.

No need to possibly get myself into a legal battle

Originally posted by @Michael Plante :

Just sold a house with multiple offers

I wouldn’t bother looking at an offer with escalation clause.

No need to possibly get myself into a legal battle

 How would considering an offer with escalation clause get you into a legal battle? Ive rarely seen offers that dont include escalation clauses.

Originally posted by @Michael Plante :

What is your definition of an escalation clause?

 An escalation clause is a clause is a clause or addnedum saying you will beat the 2nd best offer by a certain dollar amount. For instance I will beat the second best offer by $10,000. 

Nearly all offers in my market include escalation clauses.

Originally posted by @Russell Brazil :
Originally posted by @Michael Plante:

What is your definition of an escalation clause?

 An escalation clause is a clause is a clause or addnedum saying you will beat the 2nd best offer by a certain dollar amount. For instance I will beat the second best offer by $10,000. 

Nearly all offers in my market include escalation clauses.

Yes I agree with you on that

The OP was saying he included a demand to see the offer that beat Joan offer. 

You may want to entertain an offer like that. I have been advised by my atty to not