How To Manage a War - Posted by Miguel (N CA)

Posted by Holly on July 25, 2003 at 19:25:15:

Amen, Phil. Realtors played a part in getting the CA market as ridiculous as it is today by doing exactly that! I say congratulations for making a fine profit without cajoling anyone into anything or having to pay a commission.

How To Manage a War - Posted by Miguel (N CA)

Posted by Miguel (N CA) on July 25, 2003 at 18:11:47:

Hi, everyone.

On the most recent property I put up for sale, an unexpected bidding war broke out. This is the first time something like this has happened to me. I was unprepared but managed okay…well, I guess better than okay as the accepted offer was $10K over asking price.

My questions for the gang are: Could I/should I have done things differently? If so, then in what way? Was there anything “unethical” about the way things transpired?

Details:
S2, 3/1, 1200 sq. ft., $50K to sellers at closing. After fixing it up profits could be about $35K.

However, as I’m working the deal, I keep seeing the values of the houses in the area go up and up. Long story short, I figure I can get that same $35K right away just by cleaning it up and selling it as is and letting someone else do the fix up (I’m pretty slow on rehabs). Okay, fine. I’ll start it at $279,900 and see what happens. If I don’t get any interest in a week, I’ll just fix it up myself.

By the time I placed a one-day ad in the local paper’s Open House Directory and placed a sign out front (on a busy corner), I bumped up the price to $289,900.

This was on a Friday. The day before, my former business partner, after trying to get me to go down $10K, offered full price.

Okay, here’s the place where I need the input.

On Friday I started to get calls and I showed it a few times. One person would say ‘will you take $280K?’ and I would say ‘sorry, I already have a full price offer’. Then they would say ‘okay, I’ll offer $291K instead’. Then I would say I would decide in the next few days.

Then the next person would ask if I have had any offers. I would say yes. Then they would ask what’s the highest offer and I would just tell them. Then they would offer $1000 over that and ask when would I decide. In another day or so, I would say.

Right when I was ready to pick someone, someone else would call and beg to see the house right away and offer more.

This went on with 12 different buyers over the next 6 days. My wife and a real estate agent I know both said this was an unethical method of handling things.

I kinda didn’t see the problem with it, since I was being open and honest about things. I was constantly apologizing to everyone, trying to convince them I wasn’t trying to falsly drive up the price. Apparently there was way more interest in this thing than I could have imagined.

When my wife called one woman to tell her she had been outbid, she said we were being too greedy and hung up on her.

It was nice to have a house so desired, but it was still pretty stressful in trying to manage things.

The whole thing ended when I called one of the persons with a full price offer to tell her we wouldn’t accept hers if she didn’t go higher. She asked what the highest offer was (of course) and I told her $298K. She said she couldn’t budge and that was that.

She called back about an hour later to ask if I would immediately accept a $300K offer and I said yes. I called her lender to confirm her status and we signed that evening.

So, what do you think? I see ways that could have netted more AND less. What about the ethics angle?

I’m very pleased with the outcome, I think I just need to be better prepared/informed next time.

Thanks in advance for the input,
Miguel

P.S. #1 Once again, I am so happy my wife speaks Spanish, as half the buyers didn’t speak any English.

P.S. #2 Part of the deal with the original sellers was that they could leave behind whatever they didn’t want and didn’t have to clean up anything (I like making those types of deals as there’s always cool stuff I can keep).

They ended up leaving tons of clothes, junky furniture, kitchen items, knick knacks, etc. Since the house was on a busy corner we decided to throw a lot of the junk out front for a three-day yard sale.

We ended up making about $1,100 on the stuff! And we were selling stuff cheap, too! No ad in the paper, either. Can you believe that?!

Re: How To Manage a War - Posted by Anne_ND

Posted by Anne_ND on July 26, 2003 at 16:08:54:

Congratulations Miguel!

We recently put in an offer for a house we really wanted- it needed quite a bit of work, but was well worth it. Our offer was $2K over asking (unheard of in my small city) with an inspection contingency. The seller chose another buyer who offered $4K over asking with no inspection contingency.

Had the realtor been savvy, they would have come back to us or the other 2 unsuccessful buyers to ask if we’d be willing to go higher (we certainly would have gone up another $6K and removed the inspection contingency).

As a buyer I prefer your method.

nice going!

Anne

War: Some didn’t lose; they just didn’t win - Posted by Tim Fierro (Tacoma, WA)

Posted by Tim Fierro (Tacoma, WA) on July 25, 2003 at 21:30:15:

You did fine. Until you have a signed transaction in your hand, the property is for sale. All the rest is just talk and waiting for the right person. If someone asks to go higher, let them do it.

A licensed agent may have things to consider in their state laws that forbid ‘shopping’ the properties, but that is none of your concern if you are selling the property yourself.

Re: How To Manage a War - Posted by IB (NJ)

Posted by IB (NJ) on July 25, 2003 at 20:56:41:

I too see nothing unethical. Maybe in the future you could establish a deadline for all bids to be in by a certain date, as you will then pick the highest ‘pre-approved’ offer. That way, maybe the bidders won’t feel slighted. But all in all, you did good.

Re: How To Manage a War - Posted by Mark(NY)

Posted by Mark(NY) on July 25, 2003 at 19:11:46:

I don’t have a problem with how your deal went. The way I see it is…if there’s no signed contract, it’s still for sale.

Here’s how the sale of a hot property of ours in California went (using an agent):

List price range: $309,000 - $338,876

Within 3 days we received 4 offers.

Here’s how it went:

  1. $315K --> we countered with $330K --> they countered with $320K
  2. $315K --> we countered with $330K --> they accepted our $330K offer
  3. $319K --> we countered with $330K --> they countered with $320K
  4. $310K --> we countered with $330K --> they stopped

The deal closed at $330,000.

Just another example of how a bidding war can go. One thing that made it easier for us was that the offers came in at essentially the same time.

Re: How To Manage a War - Posted by phil fernandez

Posted by phil fernandez on July 25, 2003 at 18:31:41:

Doesn’t seem unethical at all to me. And you weren’t driving up the price. The buyers were. And what’s wrong with driving up the price. It’s your asset. I’d want to get the most I could from the asset. The market will determine how much I can get.

As far as the realtor saying it’s unethical. Do I hear a hint of jealousy. Don’t realtors overprice homes all the time and push for the highest price.