The phone rang in the office this morning. I had just walked in and grabbed the call. I introduced myself and asked the caller what I could do for them. “We saw the house you have for sale at 123 Anywhere and we want to place a bid on it” the caller stated.
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I ran through my usual questions:
“Are you working with an agent?” – “No, we don’t have an agent.”
“Have you seen the house?” – “No, but we want to place a bid!”
“Are you paying cash or have you been preapproved for a mortgage?” – “We’ll need a loan but we can take care of that next week.”
“Are you aware that this is a Short Sale property and make take some time to get bank approval?” – “It’s a foreclosure?”
I was holding a power-hour open house later, so I suggested they stop by and take a look. This house is priced well below market because it needs extensive work. Personally, I think financing is going to be a problem because of structural issues.
But none of this is what really got to me today. It’s the eBay mentality that appears to be taking over our industry. The only listings where I can place a “bid” are HUD Foreclosures. HUD Foreclosures are sold using a sealed bid auction format.
Every one of my 36 listings is “for sale” and I’m not running a reserved price auction. Yes, price and terms are negotiable but I expect buyers to make offers on a property by completing the proper contracts, being able to show reasonable earnest money, and proof of funds or a mortgage pre-approval from a reputable lender. When I’m working with buyers, I explain this to them if they talk about placing a “bid” on a property.
It’s not just the clients either. I hear Buyers Agents talk about placing bids on properties all the time.
Why do I think we need to make sure that buyers are not in “bid” mode?
While there are many issues, many buyers expect to be able to cancel their “bid” at any time without ramification. I had a buyer on one of my listings who decided to back out at the last minute. To make matters worse, the agent calls asking us to release the earnest money back to the buyer so they can use it for another property! This is not just a non-performing bidder email and a negative feedback situation. There can be serious legal and financial consequences.
How did we get here? Perhaps it’s a combination of the run-up mentality leading up to the melt-down in 2008 and a generation that has grown up purchasing things through auction sites. Regardless of the reasons, little real estate is sold in auction format and it’s critical to understand the implications of entering into a contract.
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