Even in today’s market, it is not uncommon to have to compete with another buyer for a home. Nothing can be more unnerving to a home buyer than having to negotiate against these faceless competitors. Can you get proof that these competing offers are legit? In most cases the answer is no.
Fair Market Sale
Most sales are between two private parties represented by two different real estate agents. You submit an offer to the seller’s agent, who then calls back and says “I just got another offer in addition to yours. We’ll be reviewing tonight, so let me know what you’d like to do.” First reaction from most buyers is “This feels like a bluff. The real estate market isn’t that great, so I don’t believe there is another offer. I want to see it before I raise my bid.” Let’s look at why that likely will not happen.
I’ve seen competing offers hundreds of times now, and I can say that the ethical and savvy listing agent will not play this game. One, they are legally and ethically bound to be truthful in their dealings. More importantly, play out the scenario if they are lying. They tell you there is another offer, you get cold feet about competing and remove your offer. Now they are left without their only legitimate buyer. A few days go by and the lie is revealed since the property isn’t under contract. The seller’s pricing position with you, their only legitimate buyer, has now been seriously compromised by the fib. I suppose there are some bad apples out there who might try this approach, but I find that even the fast-talking slicksters know better.
Why can’t the listing agent send offers to other buyers to confirm their existence and details? Buyers don’t authorize sellers to publicly air the details of their offer, and as a buyer, you don’t want to be shopped around. If you are in legitimate competition, you don’t want ANY details of your offer shared with competing parties. It has the potential to be used against you. Even confirming the existence of your offer with a competing agent could lead their client to act faster than you, and you lose the house. Mum’s the word.
Using an escalation clause in your offer is one instance where proof of a competing offer must be provided. An escalation clause says you’re willing to pay $XX more than the highest offer, up to a limit of $YY. Well, to invoke that clause, our MLS contract requires the seller to provide proof of the next highest offer.
Bank-owned homes or REO properties have their own unusual procedure. A handful of banks use auction-style websites that let you see the current highest bid, but that is not the norm. Many bank-owned properties are priced aggressively to elicit multiple bids. If you think it is a good price, there are likely 5-10 other folks who feel the same way.
Most banks do have a “highest and best” procedure. If they receive two or more bids before something has been accepted, they will send a form back to you that says “We have multiple offers. You’ve got until 5PM tomorrow to send us your highest and best offer.” The request for highest and best offer is generated by the bank or their asset manager, not the listing agent, so funny business is unlikely. They are swamped with hundreds of these properties, and don’t want to waste a minute more than they have to on each one.
Can you find out anything more about your competitors on a REO bid? Not likely. Many REO agents are overloaded and notoriously hard to reach. If you do reach them, about the most information you are likely to get is an offer count. “I’ve got 10 offers, submit your highest and best. click.” Maybe you’ll get a bit more like “offers are well over list” or something like that, but many times you are on your own.
Dealing with that uneasy feeling
It is unsettling for buyers to have to compete with a nebulous competitor, and the desire to see proof of your competition is certainly understandable. But all of these competing interests aren’t likely to share their details with you. Besides, you don’t want your details shared if you are really competing.
Some listing agents will give guidance about how strong the other offer is, home many offers there are, or what the seller is looking for. Usually the answers are somewhat vague, and your agent can help you to probe and read between the lines. Other agents will be tight-lipped and you won’t know a damn thing about your competition.
Between you and your agent, you need to take your best guess on what someone else might be willing to pay based on neighborhood data, time on market, quality of house, etc. From there, figure out the most you are willing to pay for the home and stick to it. Don’t let your competitive side get the best of you, and remember there will always be another house to bid on.