# Overbidding for no reason



## Four Pillars (Apr 5, 2009)

This is just bizarre.

http://www.moneyville.ca/article/12...-clients-offer-90-000-over-with-no-rival-bids

I don't know what common practice is for bidding wars, but I was under the impression that the seller has to tell the buying agent(s) how many bidders there are.

If you have a lot of interest in the house, of course you want everyone to know that there are multiple offers.

In this case, I'm wondering if the buying agent even asked?

My article on the two bidding wars I was in:

http://www.moneysmartsblog.com/how-to-win-a-house-bidding-war/


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## chaudi (Sep 10, 2009)

RE agents play like this all the time. Oh there is an offer coming tomorrow maybe you want to increase your offer. I am surprised they only got half back, i assume there is always conditions on offers.


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## NotMe (Jan 10, 2011)

"I don't know what common practice is for bidding wars, but I was under the impression that the seller has to tell the buying agent(s) how many bidders there are."

They do, but only if they're asked. I don't see in the article that the buying realtor asked how many other offers were registered. I know that when we bought our house in a bidding war, our realtor had us wait until 20 minutes before deadline before submitting our offer, and we knew going in there were 5 other offers. To my mind if you play a bad game against someone and they whupp ya, it's not really their fault you did a crappy job. I'm surprised they got the $45000 back, probably a threat to walk away.


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## Spudd (Oct 11, 2011)

We used the same buying agent for both houses we bought. In both cases she told us there were multiple offers. On our 2nd house, we underbid the asking price, and then after inspection, lowered our offer by 20k more based on the inspection results. The sellers were still willing to negotiate and we got it for 20k under asking after negotiation. We STRONGLY suspect our agent was lying about the multiple offers in order to increase her commission; luckily we weren't willing to overbid. We figured if we got outbid then oh well, it wasn't destined to be. 

Because it happened 2 houses in a row, we didn't suspect the selling agent (who was different in each case).


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## Cal (Jun 17, 2009)

I have been on both ends of bidding wars. On the buying end, I offered what I felt the property was worth, told the agent that was my final offer, and it was accepted. It was below asking price, but I don't really know if there was another offer or not.

On the selling end, we had 2 offers on our offer date, for the same amount, both above asking, we asked them to come back w another offer as they both offered the same. They both came back w a higher offer, but it was the exact same amount again. Lol. We picked one and signed. 

Having been invovled on both ends, I really don't see why CREA doesn't make their agents have to register the offers. It would offer credibility, and it would give more trust to a selling RE agent over an individual doing a private sale. Perhaps they are concerned it will affect their agents commissions, but I would rather offer greater financial certainty to my clients (were I an agent) making what is probably the largest investment of their lives.


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## chaudi (Sep 10, 2009)

Seems better to offer what you think the seller will accept but with conditions, then drag it out a bit and when it comes to the conditions hit them with your real price. Assuming you have time to waste and you scratch the agents conditions (which seem ridiculous anyways) such as you have to pay the commission even if the deal is not completed or if they buyer doesn't pay the commission. Why would any buyer agree to such things anyways, what benefit would it be to them?


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## Sherlock (Apr 18, 2010)

You are talking about the buyer representation agreement. I believe the general consensus among those in the know is that you shouldn't sign any BRAs as they purely for the agent's benefit and offer no advantage to you. Although I suppose in a hot market some agents might refuse to deal with you if you refuse to sign it.


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## kcowan (Jul 1, 2010)

I think walking is the best approach. My RE encouraged me to list below market in TO (market was $540k and we listed for $529k in 2009). Then she refused to entertain any offers until after the realtors open house. Invited bids two working days later. Three bids: $535, $539 and $550. She went back to all bidders telling them that there were multiple bids and encouraging them to make their best offer. There were no improved bids. We closed on the $550.

I felt that her expertise was worth her commission.


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## Sherlock (Apr 18, 2010)

kcowan said:


> She went back to all bidders telling them that there were multiple bids and encouraging them to make their best offer.


Even the highest bidder was encouraged to submit another higher bid?


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## Jay (May 9, 2012)

kcowan said:


> I think walking is the best approach. My RE encouraged me to list below market in TO (market was $540k and we listed for $529k in 2009). Then she refused to entertain any offers until after the realtors open house. Invited bids two working days later. Three bids: $535, $539 and $550. She went back to all bidders telling them that there were multiple bids and encouraging them to make their best offer. There were no improved bids. We closed on the $550.
> 
> I felt that her expertise was worth her commission.


Perhaps.. though if you didn't use her, and just listed the property for $540k and gotten it, you would have walked away with more money than you did using the agent to get you $550k (Assuming you payed your agent a 2.5% commission - I assume you'd pay a 2.5% buyer agent commission either way). That said, I've seen several disastrous FSBOs where the sellers were absolutely clueless about how to sell a place...so some people do need agents.

BRAs are 100% in the agent's interest only... there are plenty of agents out there that are willing to work without them until you make an offer. You can also sign BRAs for a very short period of time (be sure there's no hold over period) or sign one for only the property you wish to make an offer on (this is common for agents who don't require BRAs upfront).


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## kcowan (Jul 1, 2010)

Sherlock said:


> Even the highest bidder was encouraged to submit another higher bid?


Yes because otherwise they might have been outbid. Plus they did not know they were the highest bidder.


Jay said:


> Perhaps.. though if you didn't use her, and just listed the property for $540k and gotten it, you would have walked away with more money than you did using the agent to get you $550k (Assuming you payed your agent a 2.5% commission - I assume you'd pay a 2.5% buyer agent commission either way). That said, I've seen several disastrous FSBOs where the sellers were absolutely clueless about how to sell a place...so some people do need agents.


Yes I had considered it 5 years earlier when he was in the hospital and not expected to return to the home. I talked to potential buyers at that time. I was pretty convinced that they would want the discount for avoiding listing fees. But this was in Toronto and I live in BC, plus I had not sold a home in Toronto since 1997. I thought this would have been a poor choice for DIY. Plus I had my hands full with disposing of the contents and being an executor.


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## Sherlock (Apr 18, 2010)

kcowan said:


> Yes because otherwise they might have been outbid.


But wouldn't they have the opportunity to place another bid if they were outbid?



> Plus they did not know they were the highest bidder.


And that's what makes the whole process so sleazy. Each bidder should be told exactly what all the other bids are, so they know exactly what fair market value is, and can choose to bid more if they think the house is worth more. Making them bid blindly is, in my opinion, very dishonest and that's why I have very little respect for real state agents. I'm not criticizing you, I'd have done the same thing in your shoes, I'm just upset at the way the whole process works. A lot of people get really taken advantage of.


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## Spudd (Oct 11, 2011)

Yeah, the real estate agent we had over to assess our house told us the following story. 

There was a house he listed, and they got multiple offers over asking. I think he said asking was 800, and he got an offer at 815 which was the best of the few offers received. Then another real estate agent called him and said his clients wanted to put in an offer. He told the agent, we already have multiple offers, significantly over asking. The agent asked if they would accept 850. He said "ehhhhhh". The agent then talked to his clients and came back offering 900. Crazy story.


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## kcowan (Jul 1, 2010)

Sherlock said:


> in your shoes, I'm just upset at the way the whole process works. A lot of people get really taken advantage of.


I think she did me a great service by arranging a closed bidding process. Also when I screened her along with four other agents, she came across as the best. Granted it might have been a bad lot. She did not lie to anyone, just advised them so they could take their best shot.

(Don't get me started on bad RE agents. We found four bad ones with houses listed when we bought in Toronto. Our buying agent was a reputable family friend. Two of them could have their licenses lifted but that would not have helped us.)


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## bgc_fan (Apr 5, 2009)

Out of curiosity, is there anything preventing a buyer from withdrawing their bid? For example, if I were told that I was in a bidding war, I would just drop it and look for something else rather than trying to play the game. 

So if that were to happen, would the seller have recourse to try to hold the buyer to that bid? I mean it is obvious that the buyer in the article was not successful in holding the seller to the original uncontested bid. Turnabout is fair play IMO.


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## kcowan (Jul 1, 2010)

If the bid is accepted, then it becomes a legal agreement. So the recourse is like with any legal agreement. Also the listing agent has to be paid, so there is lots of motivation to hold your feet to the fire.


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## bgc_fan (Apr 5, 2009)

But if you go back to the buyers and offer another chance to bid, does that not imply that you haven't accepted the bids?

Otherwise, the situation is skewed too much towards the seller, i.e. they have nothing to lose by asking for rebids if they already have one they like, but are fishing for more money.


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## Chris L (Nov 16, 2011)

bgc_fan said:


> But if you go back to the buyers and offer another chance to bid, does that not imply that you haven't accepted the bids?
> 
> Otherwise, the situation is skewed too much towards the seller, i.e. they have nothing to lose by asking for rebids if they already have one they like, but are fishing for more money.


If your offer is in writing and you ask for better bids verbally without responding to the written offer, then the written offer would still be valid. It's not a verbal negotiation, otherwise you could just accept a handshake as you would in a flee market situation to "seal" the deal.

When you make an offer in RE and put it to paper, you're saying with full effect of the law that you intend to pay x price at x time and under x circumstances.

Buyer beware.

You can always ask for proof of multiple offers or make your offer conditional on proof of multiple offers. 

If you're a real investor, you just walk away when the price doesn't match the value so overbid if you want, and if you "win" then pay the lady and keep your word. If it was worth overpaying in the first place, multiple offers is of no relevance. People really need to grow up and take responsibility for their own decisions.


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## bgc_fan (Apr 5, 2009)

Chris L said:


> If your offer is in writing and you ask for better bids verbally without responding to the written offer, then the written offer would still be valid. It's not a verbal negotiation, otherwise you could just accept a handshake as you would in a flee market situation to "seal" the deal.
> 
> When you make an offer in RE and put it to paper, you're saying with full effect of the law that you intend to pay x price at x time and under x circumstances.
> 
> ...


Oh, I have no issue with blaming the buyer for overbidding. Obviously, if that's what they want to pay, that's their decision. 

My issue is the idea of the seller fishing for better bids when he already has already received reasonable offers. 

In my experience with the government, if we were to tender a contract and after receiving reasonable bids, i.e. all technical aspects are met, and then say, well, we don't want to accept any bid because we want a lower price, and ask the contractors to bid again on the same criteria, we could get hit with legal action when the contract is awarded after the second time.

Just to clarify, the way it sounds like it was set up, was that it was a sealed closed bidding process. Basically, all the buyers were bidding for that round, and when it was closed all the offers are considered. To go back after the process and say, do you want to bid again? implies that you have thrown out the offers and asking them to do it again, i.e. the buyers had placed their offers for that original process, but now you are starting with a second process and looking for fresh offers. The fact that the buyers offered the same amounts would indicate they did not fall in that trap.


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## kcowan (Jul 1, 2010)

bgc_fan said:


> The fact that the buyers offered the same amounts would indicate they did not fall in that trap.


Exactly! In our case, all the buyers stood pat and the high bidder won. We were happy wiht the high bid and just wanted to make sure the other bidders knew that they had to make their best offer. In a normal situation, i.e. one bid, we would have counter-offered. In fact we always counter-offered in every sale but one. That one was at the depth of the last RE meltdown and we were just happy to get ANY offer!

In my sons case, being a buyer, he just took a pass and bought another house several months later.


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