A seller setting a time in the future when they will review all offers at the same time has become common enough to warrant a blog post explaining the general pros and cons and procedure for this type of listing instruction. I just did a spot check of new listings in Kirkland 98033 and a full 2/3rds have this instruction, including both single family homes and condos. If you look only at the single family homes, the percentage is even higher. There is very little written on this topic that can be googled, so I will try to explain the ins and outs of this process best I can. Everyone does it a little differently, so this is by no means a full explanation or an absolute description that pertains to all listings with this instruction. But it should serve well as a guide to those who have not run into this yet, such as first time buyers just starting to look at homes to purchase.
First it should be noted that the SELLER, and not the Agent, must direct this instruction. Usually as a result of a conversation with the seller regarding whether or not they “have to” respond to the first offer quickly. In fact while I noted 2/3rds of the listings have the direct wording “…will look at-review offers on…” At least half of those who didn’t show that restriction, throw in vague language insinuating that the seller will not be responding quickly because they are out of town for a few days. A roundabout way of saying “…will look at offers on…” loosely.
Let’s lay out the mechanics of how this works before discussing the pros and cons from both the Seller and Buyer side of things. To that end I will describe how I do it.
Usually I list a property on Wednesday night after midnight, which is actually Thursday morning. I do this because the public sites don’t always pull the photos in the same data pull as the listing information, causing the listing to appear in mobile instant alerts with no photos. By listing a property in the middle of the night, the photos have time to catch up with the listing by the time people wake up and view the new listing on their phones or laptops. So I do this whether there is a “…will look at offers on…” instruction or not. Most often the “…will look at offers…” day and time will be Monday in the evening with a deadline for receipt of offers in the afternoon. This gives the agent for the seller time to print out and review the offers, call agents if needed for explanations or changes, and often summarize the offers in advance of meeting with the seller to review them.
It really is as simple as that without going into the particulars of how, when and why to apply this instruction or not. So we’ll move quickly into what this means for Buyer and Sellers with some of the pros and cons.
BUYERS:
When you first see a listing come on market that you want to see, you usually contact your agent. These days the first thing the agent looks for is this instruction, because it almost never shows in the public remarks and only in the Agent Only remarks. I don’t have a good “why” for that except that the public remarks has a limit as to number of characters, and most if not all of that is used to advertise the property with no room left to go into other topics. The agent only remarks area is even more limited, but there is usually room to very briefly describe this agent instruction.
The main reason the Agent for the Buyer first looks for this instruction noting how FIRM…or not…the instruction is, is to determine how quickly the agent needs to meet the buyer at the property.
If you see a property come on market on Wednesday or Thursday and they are not looking at offers until Monday, you still want to see it as early as possible to have time to consider the property before writing an offer. But if this instruction appears, you might not have to jump up from work with no notice or leave the children standing in front of school waiting for you to pick them up or interfere with the baby’s normal nap time. ALSO not all agents can jump up “right now” to run over to the property the minute it hits the market.
So the primary benefit to buyers and their buyer’s agent is it gives them a bit of time to schedule a convenient and mutually agreeable showing time.
That does not mean you wait until a Sunday Open House if the property comes on Market on Thursday and they are looking at offers on Monday. In fact most of the time I do not do an Open House during that 4 to 5 day period which encourages the buyer and their agent to view the property privately, which is usually better for the buyer. The more time you have after seeing the property to investigate further, collect your thoughts, make a good and firm decision before writing an offer…the better. The time frame is short enough from list to review date. Use that time wisely.
The second and possibly only other benefit to the buyer is it gives them some time to fully consider both the property and their offer before needing to submit that offer.
Some people are very quick decision makers and others are not. From what I have seen, buyers who have competed in multiple offers without success respond much more quickly than those for whom this is their first offer. This is not a “how to win in multiple offers” post, and in fact my next post may be “how to LOSE in multiple offers”.
This is just a basic outline of a common practice that most all buyers need to be aware of if they are looking for homes in some of the most popular neighborhoods in the Seattle Area.
Cons to the buyer of course are that they have to wait until Monday for an answer from the Seller and they are more likely to have to deal with multiple offers than if they could write an offer within an hour of the home coming on market and put a response time of same day. However this “con” from the buyer side will be addressed more as a “pro” from the seller side.
SELLERS:
Whether it is a strong or a weak market, over the 25 years I have been helping sellers sell their homes and buyers buy them, most every seller likes the property to get past the weekend before responding to offers. Given the best buyers often work for a living, unless they are cash buyers, the seller would like the people who are working for a living to have a chance to see their home before the seller responds to offers. They like their home to be listed before the weekend and they like to look at offers after the weekend. This is nothing new. In fact I just saw a house that used a wishy-washy “…will look at offers on…” stated as “Seller would like to wait until after the Open House on Sunday to respond to any offers.” I’m not a big fan of wishy washy as it leads to confusion. Some buyers will read that as a hard and fast indicator that they have plenty of time, only to be very upset to find that the house was sold earlier and the Open House was cancelled.
It is very important for the Agent for the Seller to have a very LONG and detailed “What IF?” conversation with the seller, to pin this down very clearly as to the sellers’ wishes. If the seller is a couple, you need to have this conversation with BOTH sellers.
This is not to say that the Agent should guide the seller to a “…will look at offers…” instruction. But it is important for the agent to know the sellers intentions by asking questions such as:
“If you receive an offer on the first day the property is on market and the buyer wants a same day response, are you prepared to accommodate that offer as written?”
The answers to that question are many and varied and almost no one answers a clear YES. That surprises some buyers and even some agents that the seller wouldn’t be very happy to have a good offer on the first day and take it on the first day. But in my experience the answer is usually another question as in “Do I HAVE to?” Once the seller has indicated a reluctance to accept an offer, the Agent for the Seller needs to go through a whole series of what ifs to come to a full understanding of the Seller’s intentions as to how they plan to react to offers.
Historically the “reasonable” time frame for responding to offers has been 2 days, not counting the day the offer is submitted.
In the above noted scenario of listing by very early Thursday morning, the anticipated response date and time would be Saturday by 9 p.m. here in the Seattle Area where a day ends at 9 p.m., unless stated otherwise. HOWEVER the buyer is the one who types in the response date and time in the offer and what was previously reasonable and customary is not what all or even most buyers will do in a hot market.
Since control of that response date in the offer is on the buyer side…it is important for the seller to give an instruction if they do not intend to comply with whatever a buyer may write. It is not good for anyone to start off on the wrong foot by the seller being angry at the time given or the buyer being angry that the seller chose not to respond by the time given.
Most sellers whether they have an Open House or not would prefer the home be shown all weekend when most people are available to see it, than respond on Saturday night. So Sunday night would often be the earliest date the seller expects to respond and Monday night is not a stretch and gives those buyers who weren’t available until Sunday, or even very early Monday if they were out of town for the weekend, a chance to see the property.
You might ask why not longer, and the answer to that is buyers are often frustrated with waiting 4 days and so extending that to a week or 10 days is really pushing it and usually causes more harm than good. That is a conversation the Agent for the Seller and the Seller discuss in the “what ifs” discussion. Every Seller will have a different opinion and there are no hard and fast rules and every Agent for the Seller will have a different counsel on that subject. For the most part, since I can’t speak for every Agent in the Country, I am basing most of this on how I do it and on conversations I have had with actual sellers. But the options can be many and varied.
The obvious Elephant in the Room from the buyer side is “Aren’t you just trying to start a bidding war?” Or from the seller side “Do I HAVE TO take a full price offer?”
This is where the issue gets very controversial and it is not uncommon to get some very angry calls within the first hour the home is on market.
1) NO the purpose is NOT to instigate a bidding war. The purpose is to give the seller a reasonable time to market his/her property before having to accept an offer. By any definition and anyone’s perspective, 72 hours seems reasonable. So Thursday to list, Friday-Saturday and Sunday to view and prepare offers, and Monday to submit and respond, seems more than reasonable. Except to the person who wants to be “The Early Bird Who Catches the Worm”, and I don’t blame them. But that, in many if not most cases, does not give the Seller ample time to market his/her home.
For some sellers “ample time” could be much longer or possibly shorter. But the bottom line is the seller gets to decide what is and is not “ample time”.
2) Pretty much yes…you do “have to” as to the seller’s question of whether or not they have to accept a full price offer. At least this is the conversation BEFORE the home is listed for sale. Mainly because the Agent for the Seller needs to confirm that the seller is willing to take the price at which they list the home.
It’s OK to hope for multiple offers and a price higher than the list price. BUT it is NOT ok to list the home for less than you are willing to take.
To some extent the rules and practices of this particular topic have changed somewhat since Craig wrote a post with his concerns Titled “Offers to be Considered on a Future Date” Is this Really Fair to Buyers?” in that sellers have to attach the instruction before the home is listed and must note whether or not they intend to reserve the right to NOT wait until that date to respond. Still, reading his post via that link in conjunction with this one is advised.
I wish I had 10 or more links to others expounding on this topic, but the only other has been here on Rain City Guide that I can find. If you see any others on “…will look at offers on…” vs simply multiple offer situations which I will cover in my next post, please do put those links in the comments. Thank you.
The usual insightful observations by Ardell 😉
Thanks for stopping by Gerhard! Miss you.
Sellers are being proactive by stating a deadline for offers. I agree that the problem is how “firm” they want to be honoring that deadline.
Last year a colleague had an incident similar to Craig’s client experience ~ and the agent assured him on the phone that no offers would be considered prior to the Sunday open-house.
My recommendation if a client loves the house, is to get an offer in immediately knowing they can always tweek their offer at the last minute on Monday. Also, they can pull their offer too if a nicer home comes on the market who is reviewing offers on Sunday. And if that one doesn’t work then they can resubmit Monday.
I know that sellers can be just as emotional about the sale as the buyers. A few years ago, a seller-client called me to say she didn’t want to wait and wanted to make a decision that afternoon so she could get some sleep. One agent with an interested client who I was unable to reach with the updated game plan basically chewed me out for five minutes on Monday. I don’t blame her!
So, don’t wait. Written offers can be presented anytime . A similar confusing scenario in my market is the “Coming Soon” sign… consumers should know that these houses are for sale right now and the owner retains the right to accept any written offer whenever she chooses.
I don’t agree on the “don’t wait” Doug and here most agents do wait until the last day to submit so their offers aren’t “shopped”. Even if the listing agent doesn’t intend to shop, it is their job to get highest and best. So the listing agent knowing your offer details too early on will most assuredly result in your client not getting the house…at least around these parts.
This is just a basic outline of a common practice that most all buyers need to be aware of if they are looking for homes in some of the most popular neighborhoods in the Seattle Area.
Thanks for the link, Ardell! And nice post, lots of stuff to think about. I do have one point of disagreement, though (otherwise, where’s the fun?? 🙂 ). I
t seems to me that the purpose is indeed to instigate a “bidding war.” And what’s wrong with that? Surely a bidding war is in the seller’s best interests. And the best way to elicit a bidding war is by noting an “offers considered on” date. So a competent listing agent, obviously in conjunction with and the approval of the seller, will set a consideration date in order to create a bidding war.
Where is the controversy?
Hi Craig,
First, thanks for the heads up via email. I’m not getting emails any more when someone posts a comment…so sorry for the delay in replying.
Residential real estate outside of investors and flippers is never meant to be a cut throat game, which is why it is so heavily regulated. “The Public Trust” is still in play and so listing a home at a price a seller is not willing to take is still a violation of “the rules”. In fact the rules for “will look at offers on” appear to have changed considerably since I started the practice quite some time ago. In other words it can’t be a “bait and switch” where the seller offers their home for sale at a given price, but has no intention of selling it at that price. But that’s another blog post topic. 🙂
I would have to say that two abuses by buyers started the practice of “will look at offers on” and the original intent when the practice started was clearly NOT to instigate a “bidding war” as to price. It was however intended to gather enough buyers so as to weed out the abusers who were not acting in “good faith”. (I think you wrote a post on what is “proceeding in good faith”? once.)
Going back to late 2012 and early 2013, it started becoming all to commonplace for buyers to whip out an offer within hours of the home listing. Then they would go see it and decide if they wanted it or not after blocking out any competition. They did this more because they were losing in bidding wars and wanted a chance to consider the house. It wasn’t originally so much about price as it was having a reasonable time to view and consider the home. Then they followed that with the 2nd abusive practice of cancelling on inspection without the inspection really being the impetus for the cancel. It was a quick, “tie it up, view, evaluate, keep or cancel” process.
You might say what’s the harm in that? From the buyer’s perspective it was a simple solution to their problem, but it left the seller pretty heavily damaged in most cases. We still see this happen when there is no “instruction”. The buyer is not “proceeding in good faith” and cancelling due to inspection issues. They are simply not very committed to the house at time of offer and using the inspection contingency to back out for other reasons.
So no…the seller’s intention is not a “bait and switch” tactic of listing at X to sell at Y. Bait and switch is really not a good practice and why the rules now require listing agents to have a VERY SERIOUS conversation with sellers regarding their expectations. It’s OK to be optimistic, but NOT ok to not want to sell the house at the list price if they end up with one very good full price offer and no more. So counseling a seller to expect higher than list price is bad, very bad.
Here’s a question for you that comes up, “Can I counter higher than list price if I only have one offer at list price?” or “Do I HAVE TO sell it at list price if I only get one offer at list price?” Again, read the new mls rules before answering, but that question should turn into a discussion of changing the list price. No seller should list a home at less than they are willing to accept to the point where they will be looking for excuses NOT to accept an offer at full price.
Where is the controversy? Easy. False Advertising. False Advertising is never allowed. So I would (and do) say no to a seller who wants to counter a single full price offer at over list price because that would mean the original list price was false and misleading.
Getting 5 or more offers is to weed out the buyers who are only trying to tie the property up, much like having 4 tenants to choose from helps you pick a good tenant.
We are looking for the buyer who is most likely to “proceed in good faith”. That’s why I have lately been remembering your years ago question about “proceeding in good faith” the mainstay principal of residential real estate for many decades. When all buyers as directed by their agents did proceed in good faith as the norm, we didn’t have to do any “weeding” because their were no weeds…until fairly recently.
The newest problem is the flipper who pretends he isn’t an investor and bids the highest only to do a full and deep discount negotiation of the original accepted price, at time of inspection, by including the flip improvement monies in the “inspection negotiation”. This practice is becoming rampant.
Unfortunately that is leading to honest buyers being faced with the realities of pre-inspections or no inspections. Buyers can no longer be trusted to use the inspection clause for the purpose intended. I think the answer to that is to revamp the inspection contingency so it is not a blanket right to cancel. When I started in the business it was not a blanket right to cancel, and not too long ago the “seller’s right to repair” version was eliminated (just before you got into the RE business I think).
Making it harder for people to use the Home Inspection Contingency for purpose not intended would be the best way to improve the system for the honest buyers who are proceeding in good faith but are being penalized by the increase in abusers.
You hit a lot of notes, Ardell. But I don’t think you answered my question. Perhaps it was poorly phrased! 😉
The most emphatic portion of your post states: “NO the purpose is NOT to instigate a bidding war.” I was hoping you’d clarify your position on whether it is improper (or unethical, or poor form, etc.) for a seller to instigate a bidding war. I dunno know what you think…
But I certainly think not. It is in the seller’s interests and there is nothing improper or unethical in setting up a bidding war. Admittedly, the term is distasteful. But nothing wrong with the practice.
As to whether the home inspection contingency should be changed so as to give the seller some protection (like the old “right to repair” that I did see when I started), well, let’s save that for another post. I gotta noodle on that one! 🙂
1) There is nothing wrong with “the practice” as to “multiple offers”. All multiple offer situations are not “bidding wars”. Of the many multiple offer situations I have been involved in from the buyer and seller side, very few escalated into actual “bidding wars”.
2) “Setting up a bidding war” is to suggest the seller’s intentions at time of listing are to list at X price and sell at Y price. I am sorry you didn’t understand what I said. The intention to list at X means ready, willing and able to sell at X. Not to list at X only to gain a Y via a “bidding war”. Intention.
3) Don’t noodle on the outdated “seller’s right to repair” as that is merely the other option that existed here, and one I do not favor.
The better and best Home Inspection Contingency I have seen and used has a $__________ saying the buyer has the right to cancel IF the cost to repair in aggregate exceeds $ dollars. Each buyer fills in that blank differently when competing. One might say $500 and one might say $5,000. Then all buyers would have the ability to do an inspection, and the one guaranteeing they would only back out for an item of large expense or several that in aggregate total a large expense would “win”.
That comes with a better explanation of what a “defect” is and isn’t, as most home inspectors list helpful “buyer to do after closing” regular maintenance items along with “defects”.
Back to your question that I already answered twice. While you like to tout the advantages of having a lawyer vs an agent, this is one example where lawyers with a thirst for acrimony and adversarial negotiations lean to the disadvantage of lawyer vs agent in Residential Real Estate. Again I refer you to thoroughly read the rules governing this issue. Reserving the right to a stated minimum time on market is NOT the same as pricing low with the intention of creating a bidding war.
Goodness, Ardell, I’m not sure why you’re attacking me (e.g. “Back to your question that I already answered twice” and the entire last paragraph wholly unrelated to this discussion). But I am interested in continuing the dialog because I am learning.
What is a “bidding war”? That is the problem here, you and I have different definitions. I define the term broadly and consider it to be a crass, ham-handed synonym for a multiple offer situation. Clearly that is not how you define the term.
What’s the difference between a bidding war and a multiple offer situation? Thanks Ardell!
You are funny, Craig. You are the one who asked for “a blogging death match for old time’s sake” haha OK. I’ll put the gloves on and change it to a sparring match. Speaking of gloves or no gloves, are you going to this year’s “Battle of the Barristers”? Have you been to one of those? Always entertaining.
I only noted I answered you twice because you said I did not answer you at all. 🙂 You do seem to lose track of who threw the first punch at times.
You said: “I am interested in continuing the dialog because I am learning…What’s the difference between a bidding war and a multiple offer situation? Thanks Ardell!”
Easier to answer that anectodally.
Example 1: I listed a property at the upper limit of where it might sell with a “will look at offers on Monday”. On Monday we had 3 offers. One under asking price. One at asking price. One that was incomplete, at asking price, with a number of incongruities.
That was a multiple offer situation that was not a “bidding war”. One clear acceptable offer at asking price.
Example 2: Listed a house slightly over the “comps” but the comps were from 4th quarter and the market was heating up in the first quarter with no closed data at higher prices. This happens often in Jan-Feb in an upwardly mobile market. Received 5 offers. One below asking price. One way over asking price with every known legal out available. 3 reasonable offers starting at or slightly above asking price with an escalation clause up to about 5% over asking.
This turned into a bidding war which ended up being more about terms than price. The property did sell at 5% over asking price, but the bidding war was about removing contingencies. A bidding war sometimes starts 5 minutes after you list a property with an agent trying to strong arm you into accepting an offer on Day 1 vs waiting until Monday. Usually a bidding war opens up on Monday morning or maybe Sunday night.
Sticking to the actual example #2, usually we have a time when we will review offers and that is noted in the listing. In this case it was 7:30 p.m. This was before I and others started putting in a different and earlier time to receive offers, and one of the reasons I and others now do that. At 6:30 p.m. when I was preparing the offers my phone started ringing off the hook. Three agents who hadn’t submitted an offer yet were trying to get information about the offers in hand so they could finalize their offers. Basically they were asking what it would take to beat those offers in hand. Not going to go into how those conversations went. Suffice it to say they never stopped calling and I was still talking to them while in the car going to meet the seller to present the offers. Still not really a “bidding war”. Just really annoying. 🙂
I had forwarded the offers in advance to the sellers, so they were not seeing them for the first time when we started reviewing them together at 7:30. At 8:00 I started getting calls from an agent saying “My clients will do whatever it takes to get this house! What can we do!” Well actually that call came in much later and was about the 5th time the agent called DURING the time we were reviewing offers. He was smart enough to know we were maybe talking to someone…and that someone wasn’t him. Good agent. Working hard. He was right. He wasn’t the front runner at that point. NOW it is a “bidding war”.
The odd thing in a bidding war is rarely does the person who starts the bidding war end up getting the house. 🙂 More on that below.
Now that I wear a fitbit HR I think the definition of a bidding war might be directly related to my now trackable heart rate. Bidding wars are very intense. Multiple Offers are a bunch of paper on a table. It’s not a “war” until the fighting starts. 🙂 Though I have to say the agent calling repeatedly during offer review was very, very nice. The ones calling while I was driving to were not. Often the clear losers are the meanest in a bidding war.
The events turned and the front runner was countered with the terms we might have given to the agent who called 5 times. This was more of a terms war than a price war.
Example 3 (and 4): Price War vs Terms War. Both of these had a higher number of offers or around 10. Mostly because they were properties that could not be accurately “comped” due to unique particulars about the property, or simply a lack of recent sales that were truly comparable to the listing. The list price ends up being the price you know an appraiser can appraise based on comps. The market then takes the reins.
Bidding Wars that are about price are oddly usually about a few thousand dollars even though the property might sell for over and sometimes well over 5% of the list price. You have 1 to 3 offers under list price and up to list price. Usually those are the cash buyers. You have 5 or so offers that are pretty much identical all stopping at a “hard number”. The obvious stop point. If a property is listed at $379,950 as example, the “obvious hard number stop point” would be $400,000 even. Then you have 2 or 3 slightly above the obvious hard number stop point, and if all of those are well and equally qualified, they become the front runners. Sometimes one or two of those came from the middle group who were well qualified enough to be encouraged to not have an obvious hard number stop point shortly before offers reviewed. So to some extent the bidding war can begin without screaming and yelling and even before the offers are being reviewed.
During offer review there are calls back and forth, some initiated by the review phase from us to them and some coming in from them without being initiated by us. Almost always a bidding war happens during offer review. IF you don’t finalize the offers at the end of the offer review time, the bidding war can actually start the next day. But that can be messy and risky for the seller, so I try to avoid that.
I sometimes call this “the call” and often the “loser” in a bidding war is the one who was in the top two or top three of the 10 offers or so who gets a call asking if they will X. Sometimes that X is raise the price. Sometimes that X is to remove the Inspection Contingency and change it to an information only inspection, sometimes that X is to remove the must appraise clause, sometimes that X is simply to remove some redundancies or clean up their offer in some way or restate their existing offer for clarity reasons. But almost always a “bidding war” winds up in phone calls.
A multiple offer situation almost never escalates to anyone calling during offer review time. Or more accurately, calls happen but do not impact outcome.
Example #5: just to get in another multiple offer situation that is not a “Bidding War”. Just realized none of these was my ugliest “bidding war” scenario…but I can’t cover them all.
I’ll make this examples 5 and 6 as I can think of two multiple offers or more that played out the same. I was on the buy side of these vs the sell side. My buyer clients ended up as one of the two “winners” and we get “the call”. The call in multiple offers vs a bidding war is simply that there is a tie with no distinction between the two offers. We get a very calm call not asking us for anything, simply notifying us that there is a tie and we have a very short time to decide what we are going to do about that, meaning before the agent leaves the house. Usually the first one to do that gets the house. Both offers are acceptable and better than all the others. No war. Just a tie. A tiny budge of price, well not too tiny, reasonable budge. Removing a contingency. Something to break the tie. The first buyer to do that IN WRITING and signed by the buyer (usually starts as verbal) gets the house. The loser often just takes too long to decide what they are willing to do or they don’t believe they really need to do anything and they let their offer stand.
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A true “bidding war” almost always is started by the person who does not get the house. That has been the case for a very long time and was the case in the famous bidding war that changed the language of most buyer agency agreements in the Country.
http://raincityguide.com/2006/08/07/my-favorite-real-estate-story/
The cash buyer or most qualified buyer is rarely the one that takes the action that turns a multiple offer situation into a bidding war. Those people are usually very high or very low. I call the very high one “jumping in front of the train”. The one that uses no escalation clause and just brings a too good to be true offer and knocks everyone out of the running, as was the case in one of your posts (and before the end of offer review date).
The buyer who usually begins a bidding war is most often the least qualified buyer. They are trying to make up in price or terms some inadequacy of their offer, usually downpayment and or other financing issues. Not something ridiculous like they need seller financing. Just not an impressive downpayment or loan type. They are scrambling for a toe hold and often at the point when they realize they are not getting “the call”.
End result often is the more qualified buyer gets countered with the terms offered by the person who started the bidding war, which is what happened in the famous case linked above. Though with 23 offers they were possibly not lesser qualified. That detail was never revealed.
Almost never is the bidding “war” about a substantial difference in price. Multiple Offers without a war breaking out usually escalate the price and the “war” becomes about a few dollars more and/or stripping out contingencies including the “must appraise” clause.
Maybe we can call that “the final battle round”. 🙂
My bone to pick with you, Craig is when you say your intention at time of listing is to INSTIGATE a “bidding war”. How do you do that…ethically? To come out the gate intending to instigate a bidding war, how do you do that? Do you price intentionally low? Do you instigate a bidding war by “shopping the offers”. To some extent we do have to do that when there is a tie or we need to counter a more qualified buyer with the offer of a lesser but acceptable qualified buyer.
But how do you “set up” with “intention” and further “instigate” a “bidding war”? My point to this post is “looking at offers on” is NOT with the intention of setting up or instigating a bidding war. It is simply to give the seller a reasonable market time and buyers a reasonable time to view and consider and provide an offer with informed consent and a willingness to proceed in good faith.
“Will look at offers on” should result in good and reasonable offers and at least one REAL buyer with the intent to proceed in good faith. Not “a bidding war” by design. Just enough time to make sure the first guy in isn’t just trying to tie up the property while he decides if he really wants it or not or who isn’t tossing up a high price with the intent to back track that price at time of inspection. That is representing the seller well…without pulling a bait and switch act on the buyers. The market can push the price, and often does. “You can’t be smarter than the market” ever. But never is the goal to list at a price that will cause a “bidding war”. That is creating an “auction” and if you are intending to have an “auction”, you have to disclose that in the listing as an auction property.
There is an “auction” option and if you tag that data field as “auction”, then you can intentionally “instigate a bidding war”. But you have to be up front about that, and I don’t think that is what you are talking about…or at least not before I wrote this comment.
You are correct, Ardell. I sent you that message, and I did a poor job with it. The specific words used were meant to be tongue-in-cheek, as lately I have been trying to tone down my own troll behavior (it’s really a life-long project!). When I sent you that email, I meant “let’s have an extended exchange on RCG, like we’ve done before.” I should have added: “Without, of course, the mud-slinging nastiness of circa 2007.” As the kids say, that’s my bad. Truly. My apologies. Now, onto the good stuff!
Well, I gotta say: Only you, Ardell, would say the “easier” response to a simple 22 word question is a 1650 word answer. 😉
First, our points of agreement: It is unethical for a listing agent to set the listing price at an amount that is not otherwise acceptable to the seller. No dispute there. That’s false advertising.
In addition, we agree that a multiple offer situation” involves multiple written offers, usually with escalators. Multiple offer situations are fostered (or “instigated”) by the seller setting a “offers considered on” date (in order for the escalation clauses to work properly, the seller needs multiple open offers). There is nothing wrong with this practice. So far, so good, right?
You believe sellers set a “considered on” date because they want to “test the waters” of the market and don’t want to simply take the first offer. I admit, I had not appreciated that perspective before this dialog. It makes sense. But I continue to believe the primary purpose of setting a “considered on” date is to elicit a multiple offer situation.
Prior to this conversation, I saw the term “bidding war” as a shorthand description for a multiple offer situation. You define the terms differently. You define a “bidding war” as oral negotiations with multiple buyers who have all submitted written offers or likely will do so, which are intended to lead to a sale price higher than the highest written offer. How am I doing, did I get that right?
But from there, I am lost.
In your exchange with Doug, you note: “here most agents do wait until the last day to submit so their offers aren’t “shopped”. Even if the listing agent doesn’t intend to shop, it is their job to get highest and best. So the listing agent knowing your offer details too early on will most assuredly result in your client not getting the house…at least around these parts.”
So clearly there is no ethical bar to “shopping an offer.” I assume that means where the listing agent contacts one or more buyer agents and shares the terms (whether price or otherwise) of a competing offer. The purpose of doing so is to elicit improved terms, surely. And thus “shopping an offer” is the first step in a bidding war. Or am I missing something?
In your latest comment to me, you note: “I started getting calls from an agent saying ‘My clients will do whatever it takes to get this house! What can we do!’ Well actually that call came in much later and was about the 5th time the agent called DURING the time we were reviewing offers. He was smart enough to know we were maybe talking to someone…and that someone wasn’t him. Good agent. Working hard. He was right. He wasn’t the front runner at that point. NOW it is a ‘bidding war’.”
So clearly there is no ethical bar to a buyer’s agent initiating a bidding war, either. Again, am I missing something?
I know you believe you’ve answered my question a bunch of times. I’m sorry, though, I still don’t understand. I still don’t understand the apparent controversy of a bidding war. And now I don’t understand why you believe it is grossly unethical to set a “considered on” date with the intention of instigating a bidding war.
That’s the bad news. The good news: I think I’ll post on this very topic! So hopefully
Reading as I answer and I am up to “But from there I am lost.” and yes, we are in agreement up to that point. We do want more than one offer in case the one offer is technically acceptable as written, but the buyer is depending on legal outs to change or negate that offer before it closes. We are flushing out the “bogus offers” prior to acceptance of an offer.
In fact when “bogus offers” started, I received over full price cash offers within an hour of the home going on market and before anyone had a chance to view the property. Zero showings…one over full price cash offer with an inspection contingency and numerous other “bail” clauses in case they didn’t even want to pay money for an inspection once they came to see the home. You can see why there needed to be an answer to not accepting an over full price cash offer, especially if it got hairy into “protected classes”, as to why one would not accept an over full price cash offer. “Will look at offers on…” solved that problem.
As to the rest, your comment at present seems to stop dead in the middle of a thought. But I want to thank you for the exchange because my (and our) PRIMARY purpose when talking to one another is for the benefit of many who read the exchange and gain some insight. There is not enough written on this topic and what is written doesn’t reflect reality very well. In fact I have my clients reading this now and in the future so they have a better understanding of how this all plays out.
So sincerely thank you from the bottom of my heart. A back and forth exchange between 2 “insiders” is of more value to readers than a flat post and why I choose to be verbose for the benefit of others reading this now and into the future.
Will start a new reply for your “part 2” questions.
Craig: “So clearly there is no ethical bar to “shopping an offer.” I assume that means where the listing agent contacts one or more buyer agents and shares the terms (whether price or otherwise) of a competing offer. The purpose of doing so is to elicit improved terms, surely. And thus “shopping an offer” is the first step in a bidding war. Or am I missing something?”
The part you are missing is the direct answer to a direct question vs how things actually play out. If an agent for one of the buyers asks what the other offers say or what the most acceptable offer says, and they will sometimes ask, most any agent will answer sorry I can’t tell you that. Usually the Agent for the Buyer then laughs and says I know, but no harm in trying. 🙂 So almost never does the Agent for the Seller reveal to any agent for any of the buyers what another offer is. That’s considered “dirty pool” and generally is not done for many reasons.
So pure and simple “shopping” gets too close to “auction” tactics, and no that is not how it plays out in most if not all cases. It also ruins the reputation of the agent, so whether it is for ethical reasons or selfish reasons, most agents will not reveal the details of another buyer’s offer.
The agents for the buyer, most all of them, will ask for a critique of their offer by the agent for the seller, prior to the offer being reviewed with the seller. OR the agent for the seller will call the agent for the buyer to clear up any and all issues in the offer, prior to meeting with the seller.
Important to note that this has ALWAYS been the case, and how offers are usually handled, even when there is only one offer. Before we were emailing offers it was customary for the Agent for the Buyer to physically bring the offer to the Agent for the Seller and ask them to look at it while the agent was still there, to help perfect the offer. Some agents still ask to deliver the offer in person for this reason so the Agent for the Seller fully understands the entire offer before meeting with the Seller.
Agents for the Buyer do ask questions while writing offers, even when there is only one offer. What closing date would be best for the seller is a common question, as example, prior to writing the offer. So the Agent for the Buyer discussing the terms of their offer, without regard to provisions in other offers and even if there is only one offer, is and has always been part of the offer and acceptance process in residential real estate. Fast close is not always best for an occupied dwelling, as example. A seller may have a specific date they need to close in order to close on their next home. They may need “closing plus 3” which I call “the CA close” that is structured around the seller’s purchase.
So an agent for the buyer discussing the terms of their offer with the Agent for the Seller IS part of the process whether there are other offers or not. That is not “shopping an offer”. It is just happenstance that at the time of that normal and age old discussion the Agent for the Seller may be privy to details of another agent’s offer at the time of that exchange.
What you are missing is the fine line between the agent to agent review of an offer vs “shopping” by revealing terms of another offer. The smart buyer’s agent tries to do this in person so they can read the body language of the agent who is looking at the offer. Micro-expressions. Whatever. Like playing poker. No the Agent for the Seller did not disclose anything…but a smart Agent for the Buyer can still know everything they need to know whether it is an in person exchange or a phone conversation. A buyer’s agent who isn’t doing this well and right is not dong their job at the best possible level. This plays out in many ways whether there is more than one offer or not. Each agent representing their client well without coloring outside of the lines.
Think of it this way…the Agent for the Buyer might ask “Should I add an escalation clause?” Usually they ask that by saying “do you have offers in hand” and that is why my answer to Doug is don’t send it too early. If on Saturday in an offers will be reviewed on Monday the agent answers that question “yes I have 5 offers in hand” the agent asking the question will write his offer differently than if the answer is no.
Capish?
Will do the ethics of seller’s agent vs buyer’s agent in next comment as that hinges on “where’s the harm?”.
“What you are missing is the fine line between the agent to agent review of an offer vs “shopping” by revealing terms of another offer.”
OK. So “reviewing an offer” is fine, but “shopping an offer” is not, and there’s a fine line between the two? Honestly, that doesn’t seem consistent with what you said to Doug:
“Here [in the Seattle area] most agents do wait until the last day to submit so their offers aren’t ‘shopped’.”
There, you used “shopped” and it meant something that;s fine and done all the time. Surely the term “shopped” meant something more than simply sharing the fact of multiple offers. I dunno, I guess I am confused as ever. 🙁
But this conversation has been very illuminating, thank you. I will soon post here on RCG on this topic – super good stuff!!
haha…you are always like a little boy looking for an excuse to be bad.
But yes and yes. There is a fine line between reviewing and shopping. And Yes you are correct that I said to Doug that an offer might be shopped. For instance I would fully expect you to shop it. haha
So buyer’s agents ARE right to protect their client as much as possible as there will never be all ethical agents in real estate. Far from it! Who do you think was writing all the bogus offers that caused us to need “will look at offers on…” in the first place?
There’s a small % who will write bogus offers. That someone does it does not make it right and we do need to look out for it the same as we need to look out for being shopped.
We pretty much agree now I think. There is never 100% one way to do things or 100% everyone will do the right thing. We are close enough. 🙂
1) Craig’s most recent question: “So clearly there is no ethical bar to a buyer’s agent initiating a bidding war, either. Again, am I missing something?”
2) Craig’s original stance: ” It is in the seller’s interests and there is nothing improper or unethical in setting up a bidding war. Admittedly, the term is distasteful. But nothing wrong with the practice.”
Let’s start with 2) an Agent for the Seller coming out the gate with the intention of setting up a bidding war.
Agent prices the house at $500,000 with the intention of selling it at $650,000. We have both seen this happen by the way, because we both saw it on the same house that we both had offers on. LOL! Actual numbers changed slightly for obvious reasons.
Where’s the harm? They receive 25 offers and 12 or 13 of those offers did pre-inspections. Let’s say an inspection costs $500. 12 times $500 = $6,000. It is just bad, bad, bad to cause a $6,000 expense to consumers in wasted dollars.
Lately I have been seeing “no pre-inspections”, but that just makes an even worse but different problem, So not a good answer.
There are other reasons why 2) is unethical or against a law or a rule, but once you have one really good reason not to…let’s move on and say just don’t do it. Never list a home at $X with the primary objective of getting $Y. Great to be optimistic that $Y might happen. But if you know $Y WILL happen at the time you list it at $X…wrong to list it at $X in the first place.
I will write a separate post on “How do you choose a list price” to expound on that, and there is never only one answer to that question. But saying you as an Agent for the Seller had the intention of setting up a bidding war prior to listing the home, usually means you, as part of that overall strategy, priced it at less than you KNEW it would sell for. And that is not a good thing.
Next
Your statement 1) above: “So clearly there is no ethical bar to a buyer’s agent initiating a bidding war, either. Again, am I missing something?”
The Agent for the Buyer is NOT instigating a bidding war. That is never their intent. Their intent is to get the house for their client. The LAST thing they want is to give you something to get a better price from someone else. It may turn out that way, but no, no and double no would their “intent” ever be to instigate a bidding war.
The key here Craig, and maybe what you are missing, is intention is KEY! regardless of which side of the table you are on.
The Agent for the Buyer is always talking to the Agent for the Seller about their offer, whether there is more than one offer or not. The Agent for the Seller is often telling the Agent for the Buyer “be available this evening between 6 and 8 p.m. in case we have questions during offer review and need to reach you.” whether there is more than one offer or not.
The difference is that conversation and how it plays out. The Agent for the Seller may call one of the agents, and usually does, during offer review with a counter as to price and terms.
Example: Only one offer on the table at less than asking. Seller wants to counter at full price. Agent for the Seller picks up the phone and calls the Agent for the Buyer. They go back and forth verbally on price or close date or other things and pin down the final contract verbally, both agents talking to their clients back and forth in a few phone calls. They agree verbally. Agent for the buyer puts it on paper, has the buyer sign it, shoots it to the Agent for the Seller who is sitting in the seller’s house, and everyone signs before the agent leaves the house. Going back 25 years this is often the way ONE offer is handled, though in the old days to do this the buyer and their agent were sometimes sitting outside in their cars because we couldn’t email or fax. haha Old School.
Written counters leave the door open. Some buyers think the seller can’t accept a better offer if it comes in during negotiations, if there were no other offers at the time of counter. You and I know that is clearly not the case. So even with ONE offer, it is customary to wrap that up in writing at one review sitting unless the seller wants that door open. The buyer almost never wants that door open, so they sit out front. 🙂 These days they just have to stay awake and by a computer. No more late nights sitting out front in the cold in the dark. BUT…still some smarts are needed by both agents. Timing is everything.
So what you are missing is that multiple offers, bidding wars, are not different than with one offer. NO intent to “instigate” a bidding war. The exchanges are the same.
What makes it a “war” is when the parties start “fighting for the house” and that is never an “intent”…it is a happenstance.
It used to be more obvious because there were 6 cars sitting outside the house or as in the Bay Area case, 20 or more buyers sitting outside with their agents in an anteroom. Hannah (in the link case I posted in the comments earlier) busted into the room with the seller when she said We’ll do whatever it takes! or something to that affect. Everyone could see her do it. These days because of email signing programs it happens on the phone.
But it was not Hannah’s intent when she did that to “instigate a bidding war” nor is it ever the buyer or seller’s agent’s intent to start a bidding war. It was her intent to get the seller to accept her buyer’s offer. It was happenstance that the original front runner got the house for approx. $200,000 more than the seller was about to accept, because of Hannah’s actions. And that is why the buyer who had to pay $200,000 more than if Hannah didn’t do that, sued. The case never went to Court. It’s a great example of bidding wars and maybe the first documented case…maybe in the 90’s? I’ll have to go back and read my old, original post.
Here’s the link again so people don’t have to go to previous comments to find it.
http://raincityguide.com/2006/08/07/my-favorite-real-estate-story/
In that case the seller did NOT want to deal with some ungodly number of offers. It was never his “intent” to be put in that position. It was not the Agent for the Buyer’s intent to instigate a bidding war either.
What causes a bidding war is the buyer’s being willing to pay more than the seller and the seller’s agent knew the home could appraise for using hindsight.
A bidding war is the result of a market in the midst of an acceleration beyond what any seller or even appraiser could guess in advance. THAT is why a “bidding war” vs “multiple offers” almost always ends up with a strike out of the “must appraise” clause.
A bidding war (vs multiple offers) should result in a price that may not appraise, as the Listing Agent priced it at what he knew might appraise. So getting 10% over asking is by definition going to an area that might not appraise. If not…then the Agent for the Seller under priced it with the “intent to instigate a bidding war”, which would be wrong.
Who cares about appraisals in this market? Or haven’t you lost out to an “all cash” buyer just yet? 😉
More importantly I think the conversation in its entirety will help people who need more information about multiple offers generally.
In a multiple offer situation, I tell people that they have a 50/50 chance if they waive appraisal and go 10% over list price. Having said that, I just sold a townhouse in the Central Area that was listed at $479k…had 5 preinspects and 7 offers (all with waived inspections)…none with waived appraisals. We took the high offer at $530k…and it appraised for $535k.
I just experienced a Realtor in Seattle who grossly under priced her listing. In 20 years as a prolific broker she had never done a transaction in the central area. I felt bad for her because she had lost count of preinspections. She was absolutely convinced that a financed offer wouldn’t appraise.
Waive appraisal? Who wants to do that, Dan? Whatever happened to due diligence?
Richard,
Waiving Appraisal is pretty common here in multiple offers. Remember the appraiser does not have access to any “secret” information that we as professionals don’t already know. In fact most appraisers call us on our past sales for opinion of value when they are doing an appraisal.
If an agent can’t accurately guesstimate the appraised value without an appraisal…you probably shouldn’t hire them.
Yes, maybe appraised value is part of the due diligence. But needing an appraiser to tell you that vs your agent is really not necessary. In our market it would be a mistake at times to not know that prior to offer.
We have lots of these in my area. Guess what? Lots of them dont close. Why not? A buyer has 48 hours to make the largest financial decision of their life, what could go wrong? Buyers aren;t dumb, getting under contract is as easy as making an offer, the actual decision can come later and the buyer will have several weeks and many contingency options to not close on the home.
I know this is an older article, but just finally had a chance to read it start to finish and couldn’t agree more. You are so 100% correct. As the market heats up in our area (White Rock, BC) this is become a more and more common practice. Giving 72 hours for prospective buyers to view is more than reasonable, although we tend to accept offers Sunday evening around here instead of Monday. Love your points about having the ‘asking price conversation’ with clients as yes, they should be willing to accept that, or raise their asking price. The point here isn’t to start a bidding war (although that always make me look good) but to get their home proper exposure before deciding on what the best offer truly is.
We put an offer on a home which stated “reviewing all offers on Friday” (the seller is a relo company)
Today is Friday and we did not hear back. Is the “reviewing day” the same as decision day?
(The house has several offers)
Thank you!
Hi Kate. Whenever the seller is a Relocation Company, the reaction times are usually a bit slower. The review day is the day the seller will be looking at the offers. Some sellers take longer to respond than others and some Relocation Companies, if not most, don’t operate on weekends. Often with a Relocation Company you hear verbally before you receive the signed acceptance. Bank sellers often similar.
Usually when I have a review date I ask that the offers give a response date as the next day, since a contract day ends at 9 p.m. here and often we don’t start reviewing until the seller comes home from work. Technically if you answer on the review date, but after 9 p.m., it is the next day.
Relocation Companies usually don’t answer after 5 p.m. THEIR time, so the day can be over by the time the offers arrive. If that’s a Friday, that usually shoots you out to not earlier than Monday. The normal time frame to give a Relocation Company is 5 business days.
ALSO a Bank or Relocation Company is more likely to dot their i’s and cross their t’s more before they sign. So while they may pick an offer early, they sometimes take a few days to perfect the offer. Almost always if you are not hearing anything at all, the seller is talking to someone before the acceptance being final, and that someone is not you. Easier to know that when the seller is not a Company.
I personally like to complete full acceptance of one of the offers on the night of the review date and almost always do. But it’s not uncommon for the final notice to appear on the next business day. Some sellers like to “sleep on it” before signing. Some agents “perfect” the contract after the sellers review vs before, so they need some final initials on incidental items before call it “done”.