Faulkner: Combine blind and open bidding for home sales

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When selling your home, you and your realtor will choose how to handle multiple bids on your listing.

In our region, the blind bid is more common. A blind bid can be unsettling for a buyer competing in multiple bids as the buyers don’t know if the other bids are above or below the list price and how much over the list price.

An open bid is similar to an auction, where every buyer knows the price of the other bids. Either method can work well; however, we have found that a combination of blind and open bids often works best for our sellers.

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When we represent a buyer in a multiple-offer scenario, we ask our buyer two questions: What is the highest you are willing to pay, and what is the price at which you would be OK losing the offer?

This is like walking a tightrope: We don’t want our buyers to pay too much or lose the bid.

When representing a seller, we often list the home at an attractive price to garner many offers. You can look up an article I wrote several months ago titled: “Ask for less, get more.”

We often list a home on a Thursday and inform realtors that we will present offers to the seller on Sunday evening.

In our experience, offering the home at a competitive price increases the urgency and the number of offers. Delaying the presentation of the offers a few days gives buyers time to book showings and view the home over the weekend.

We always want to find buyers who will pay the most to our sellers in Edmonton. The buyers that tend to pay the most to our sellers are often from somewhere other than our region. Those buyers are typically from Ontario, British Columbia and Calgary.

These out-of-town buyers will inevitably see our homes as bargains and are often willing to pay more than a local buyer. If these buyers have already lost out on two bids or more, they will likely bid significantly higher than the list price and win the bid as they feel the home is a great buy at our prices.

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When we represent a seller, we review the offers and look for the offers with the best price and terms. We will also ask the buyers to prove that they qualify for the mortgage at that price. That proof is usually an email from their lender stating the maximum price they are qualified for.

We ask for that question because we want the offer to be completed the first time, as it is a fresh listing that can create a lot of enthusiasm. If we have to try to sell the property again, as the first offer has failed, we may not get as many offers on the second go around.

Once we have received the offers on the initial listing, we may counter one or both of the highest offers. Our seller may prefer the terms of one offer and the price of another. In that case, we may counter the offer with the best terms with a price equal to or better than the best offer.

This is a tightrope, too. If we push too much, the buyer could have remorse, especially after the inspection, when they might decide the home is not worth it and then walk away.

Sometimes, the buyer’s bank may do an appraisal and find the home overpriced. In that case, the bank may be unwilling to finance the full amount, and the buyer may have to come up with a bigger down payment or walk away from the deal.

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My associate and I usually recommend a combination of blind and open bidding. Initially, we use a blind bid process by asking realtors to submit their best offers without knowing the other offer amounts. Then, after reviewing the offers, we may counter back one or more of the offers at a higher price by letting the buyer’s realtor know that if they want the home, they have to increase their offer by a certain price.

Sometimes, one offer may be significantly higher than all the rest. In many of these situations, the buyer who has lost out on several bids brings the highest offer because they are very determined not to lose this bid.

Our seller always decides how to handle the process. We advise them of their options to the best of our ability and recommend what we feel is the better process based on our experience, and then they decide how to move forward.

Dennis Faulkner, BA Economics, works as a realtor at MaxWell Challenge Realty. He can be contacted to answer your real estate questions at dennis.faulkner@icloud.com

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