By Ross Wilson
“The only competition worthy of a wise man is with himself.” – Washington Allston
Legal and ethical protocol dictates that during a bidding war, buyers are deliberately kept unaware of the terms of competing offers. To ensure a blind bid, all offers are typically presented separately in one session, and in the same order as they were registered with the listing brokerage. Each buyer agent is given a brief private opportunity to argue the merits of their client’s offer.
To help develop a feel for each buyer’s intention and position, a smart listing agent will take advantage of these moments by asking questions of each agent (who often inadvertently disclose too much) regarding their client’s offer. The length of each presentation will obviously depend on the quantity and complexity of the offers. Afterward, each agent is asked to leave a copy with the listing agent for later comparison during a private consultation with the seller. This continues, usually with all agents (and sometimes the buyers) waiting elsewhere in the home or outside, until all bids have been presented.
With a copy of each offer spread before them, the seller and their agent compare the pros and cons of all bids. Sometimes, the seller may reject the least acceptable and work with only the best few, or they may simply accept the best one. If the irrevocable dates permit, they might counter one while holding all others in abeyance. If that counter-offer is accepted, the show is over. However, if it’s rejected, the seller may repeat the procedure with the next best offer until an APS is executed.
When countering, it’s critical to be ever mindful of irrevocable dates and times. If a seller counter-offer is verbally rejected by a buyer, but the seller’s written irrevocable time and date haven’t strictly expired, that buyer could change their mind prior to the technical expiry of the seller’s offer and accept the counter-offer. Assuming a verbal report of its rejection to be binding, if the seller proceeds to deliver another fully executed counter-offer to a second buyer while the first counter remains officially valid, and the second buyer accepts it, the seller has risked contractually committing to two separate buyers. Be very careful – this is really easy to do. And you may pay the price for your negligence, maybe a big one.
Nevertheless, sellers often elect to return all offers untouched to the respective buyer agents, thereby allowing each buyer a chance to improve their bid. In this event, the listing agent should forewarn their seller of the possibility of some or all of the offers being withdrawn. When the remaining offers are re-registered, the entire process begins anew in the order of their return. After a brief private consultation with the listing agent, the seller usually chooses one.
When given the chance to enhance the terms of their offer, if a buyer is unable or prefers not to increase the price, they should re-submit anyway. One never knows; some or all of the other buyers may feel the same way and refuse to alter their offer terms or even withdraw from the competition. It would be a shame to lose a bid because your buyer gave up, especially since it costs nothing to persevere. Instead of quitting, consider other ways to improve their offer. Removing conditions, adjusting the closing date to comply with a seller’s preference, excluding chattels, eliminating seller requirements or increasing the deposit might do the trick. Usually, though, it comes down to conditions and price.
When a buyer unwisely shuns all competitions, they miss out on the possibility of acquiring an obviously desirable home. It’s like not buying a lottery ticket; you can’t win without playing the game. Rather than be frightened or intimidated, they should proactively commit to a maximum realistically affordable price – in advance – that’s not ridiculously over what you collectively agree is fair market value, and faithfully stick to it. Don’t budge.
During a competition, if offer prices soar into the stratosphere and well over your buyer’s previously determined maximum, encourage them to resist the temptation to join the frenzy. Bidding wars can be emotionally challenging and exceedingly expensive. If they lack sufficient financial clout or the stamina to continue, and/or prefer to avoid paying top dollar, tell them to walk away. There’ll be another property somewhere sometime that they’ll love just as much and maybe more.
In the final of this three-column series, I opine on the controversial topic of what has become known as the infamous bully offer.