[quote=pemeliza]- My mother rents a farm in Indiana. When she took bids for rent she asked for sealed bids. Why? The reason is that several farmers in the area gave bids that were essentially something like “I’ll pay 1$ an acre more than the highest bid”. She did not think that was fair and she was also afraid that if word got out that nobody would bid if they know the game was rigged. It turns out the bids for the most part were fairly close together and yes the highest bidder got to rent the land and was happy to so it at the price he offered. Some people were disappointed that they didn’t get the winning bid but they said they would bid again in the future. If a seller has something that many buyers would like to have this is a reasonable way to do business.[/quote]
pemeliza, I agree with your mom’s “system.” About 25 years ago, I became an authorized agent to show and write bids for VA repossessed properties. They used a different lockbox and key than the Realtor Boards used. Almost all the properties were cosmetic to heavy fixers and were to be sold “as-is.” There was only ONE property mgr. for them in town, located in a little house in PB on Grand Ave. Their duties were to check out lockbox keys to authorized agents, place lockboxes and conspicuous notices on the properties, see that all safety hazards around the properties were removed so they could be viewed (broken glass, old frig’s lying outside, mow down tall weeds, etc) and accept the sealed bids in person and thru their door slot and messenger them to the V.A. on the designated day of bid-closing. The Rules were all in writing and all agents knew them and explained them to their client bidders. Lists of properties were published in the newpaper twice monthly with a “suggested bid price.” Buyers bids had to be submitted on VA Forms by a certain date with their authorized agent, listing the lender they intended to use to buy the property along with a $1,000 bid “earnest money” check to be returned to the bidders who were not selected. A bidder had 60 days to close the transaction if selected. Bidders could bid up 10% under the VA’s suggested bid price if they didn’t feel the property was worth it and enclose recent sales comps to support their lower bid. The “winning bid” list was faxed to the agents about five bus. days after the close of bids took place and the names of the “winning” bidders and their broker were published in the newspaper the following week, along with the next list of properties. The VA in Los Angeles picked the “winner” by how much they would net. A bidder could ask the VA itself to fund the property, even if they were not VA eligible. These bids were considered ONLY if the VA didn’t have any qualifying conventional bids to get them out of the property (even if lower). If a bidder got into escrow and couldn’t get a loan to close the deal due to misrepresentation of their financial situation on the VA bid form they submitted, they lost their $1,000 as liquidated damages and the property was put back up on the next list.
There were NO counter offers. The VA never called the buyer’s agent to ask if his/her clients could “come up in price” or put in their “last, best and final offer” if they were still interested, etc.” The bids were opened by the VA and that was the end and they went on to the next list.
As a buyer you didn’t know how much the other bidders bid, but all the bids were in writing, including the financial details of the bidders, opened by a government entity in another County.
The whole operation was conducted fairly. My spouse and I even won two of these bids, fixed up the properties and later resold them for profit.
There’s nothing wrong with a legitimate sealed-bid system, but that’s not what’s happening in today’s residential RE market. What I have a problem with is when a buyer today responds to a “submit all offers” request after a listing agent tells his/her buyer’s agent that they do not have any offers yet. After the buyer’s agent submits buyer’s offer, the listing agent calls buyer’s agent back and states, “I have more offers coming in so we’re going to need longer than 3 days” (or whatever timeline you have put in your offer to accept/reject it). Or “We’ve now decided the seller is going to read all offers on the 15th so you’ll have to extend your timeline,” when Buyer #1 KNOWS they were the first one to put in an offer on the property. Seller doesn’t want to reject Buyer #1 outright RIGHT NOW, until they give themselves a little more time to amass offers (esp. if the prop. just came on the market). Instead of countering B#1, they want to string him/her along to try to make them think a few other “legitimate offers” are under consideration, hoping B#1 will be “nervous” enough to up the ante when a little more time passes. Listing agents have also been known to play B#1 against a legitimate second offer, when B#1’s offer came in a week earlier but they were successful in stringing B#1 along without countering them and thus scuttling the deal one way or the other in a timely fashion. I don’t think any buyer should have to bid against themselves. Essentially, unless a property is unusually desirable, I think most “bidding wars” are just trumped up by the listing agent to “seem like there are multiple bids” but are really just BS time wasters. That why I advocated calling their bluff and WALKING if sellers started “gaming” my clients by giving excuses why they can’t counter or reject a legitimate offer within a reasonable time period (3 days). I’ve just seen it all over the years, get it all and wrote the handbook. IMO, the whole practice of submitting and accepting/rejecting/countering offers has really gotten out of hand in recent years, most likely because buyers and their agents are willingly “playing the game.” RE practice is NOT a game. It’s purely business, with a live buyer’s REAL HARD-EARNED $$ at stake and should be treated as such.
