Sealed Bids to sell Home

[RockyMtn]

We are wrapping up a remodel project here in Scottsdale and will soon be ready to put our existing house on the market. We have had five individuals express interest in purchasing our current home prior to it being listed.

We intend to let all five take a look at the place and then if there is enough interest in purchasing we would like to avoid a realtor and just go through a sealed bid process where people put in a "best and last" bid. We will set a minimum price for the property. Will then hire a lawyer to draw up sales contracts, etc.

Anyone else do this? Am I missing anything?

 

[pb4uski]

Wouldn't you be better off to try to facilitate a bidding war rather than best and last?

 

[MooreBonds]

We are wrapping up a remodel project here in Scottsdale and will soon be ready to put our existing house on the market. We have had five individuals express interest in purchasing our current home prior to it being listed.

We intend to let all five take a look at the place and then if there is enough interest in purchasing we would like to avoid a realtor and just go through a sealed bid process where people put in a "best and last" bid. We will set a minimum price for the property. Will then hire a lawyer to draw up sales contracts, etc.

Anyone else do this? Am I missing anything?

Have only purchased my first home, so haven't gained direct experience in selling.....however, if I were looking to sell without a realtor, I would want to establish what I thought was a 'fair market price' that I would have listed at with a realtor. That way, all bidders would know that they aren't going to try and get it for some ridiculous lowball price. How does your "minimum" price compare to what you think you could reasonably expect to get with a realtor after having it on the market for a few months?

Also, you can also gauge their interest by seeing how many are still interested after you mention what you expect a house like yours to fetch on the open market. If 3 of the 5 say "ahh....well, what you expect to get is a little out of our price range", then you know you are really only dealing with 2 serious bidders ahead of time.

I'd rather find that out than trying a sealed bid and finding 2 low-ball offers and 3 mediocre offers.

However, if you are in a very hot seller's market, then your results could obviously differ by using a sealed bid format.

One other thing is figure out how you would weigh conditions of offers, and (if possible) tell the bidders how you would score it. If someone has the highest bid, but it's contingent on them selling their house first, how would you value it compared to someone who's, say, 5% lower but has cash in hand and can close in 30 days? Would you require all bidders to have the same earnest money deposit? Bidders might be willing to be more aggressive if they know ahead of time what their bid stipulations might be worth to you.

Also, are the bids all going to be opened in front of them? Or just you see the results?

 

[papadad111]

We did something similar with my moms house. Worked well. Took the top bid. Buyer paid cash. Sold in as-is condition so no need for inspection or real estate broker fees.

 

[RockyMtn]

I know the value of the house and would set the minimum accordingly. There is not a single other property available in the neighborhood (44 home subdivision) at this time but there are several recent comps that I can use to set the price. All interested parties would be aware that there are four others interested in the property. That is about as far as I can go in creating a bidding war. Don't want to go several rounds as these people are acquaintances.


My goal here is to basically save the $32k in realtor fees.

 

[daylatedollarshort]

Sometimes houses locally will sell for much more than 6% over asking price or recent comps. It depends on how hot your market is but sometimes a wider pool of buyers might make more than what is lost in commission fees. I am not a fan of high commission fees, but that is the reality of what I see happening in our neighborhood, especially in spring.

 

[sengsational]

Sealed bid or open, it would seem to me that each of the group could get upset with the others. If the highest bid is not as credible as the next, you might get in hot water by not accepting the highest bid (it's up to you which to accept). But if my place had 5 people who were ready, willing and able to buy for at least my "reserve" price, I would go with a sealed bid, if only because trying to manage an open bidding situation with that many bidders can be really messy.

 

[jerome len]

I'd ask for a 10k deposit and a guarantee of cash or financing proof along with the bid. And, your State may require an inspection along with the tranfer of title. Your lawyer can tell you what you need along with the bid. Myself? I'd pay a realtor a 1% commission to handle all if YOU give him/her a qualified buyer. It would be worth it to me to get rid of the hassle. I bought an empty lot this way......but I paid a realtor 1% to negotiate with a "flaky" seller. She did a great job and I saved a lot of pain and money.

 

[photoguy]

Sometimes houses locally will sell for much more than 6% over asking price or recent comps. It depends on how hot your market is but sometimes a wider pool of buyers might make more than what is lost in commission fees. I am not a fan of high commission fees, but that is the reality of what I see happening in our neighborhood, especially in spring.

+1

In a hot market I also wouldn't be surprised if you could negotiate down the commission to 4-5% level. Especially for a house that will sell in a few days.

 

[utrecht]

+1

In a hot market I also wouldn't be surprised if you could negotiate down the commission to 4-5% level. Especially for a house that will sell in a few days.

We just sold our house and I tried that. My agent agreed to a 5% commission. I assumed that this meant 2% for her and 3% for the other agent, but thats not the way it works. Its 2.5% for each agent. Because of that a lot of buyers' agents wont even show the house to their client because they dont want to give up 0.5% commission. Now, if I was the buyer and I saw the house and was interested but my agent didn't want to show me the house because of a lower commission, I would find a new agent....but thats me.

In our case, our house was listed on the MLS as a reduced commission. The first person who looked at the house made a great offer (5% over list) which we accepted. But then the agent called and asked if we would pay the additional commission. Why would we do that? We declined.

The agent called back and said that her buyer didnt have the money to pay the additional commission and that if we didnt pay it, her buyer was going to pull the offer. Something smelled fishy there to me. I dont know if the agent and buyer are good friends and the buyer agreed to not buy the house if we didnt pay the full commission, or if the agent was willing to lie to the buyer and say we didnt accept the offer, or what. We went ahead and agreed to pay the extra commission because the offer had other details in it that was really going to help us with our situation.

This IS a hot market. We accepted that offer 6 hours after the house hit the MLS.

 

[photoguy]

We just sold our house and I tried that. My agent agreed to a 5% commission. I assumed that this meant 2% for her and 3% for the other agent, but thats not the way it works. Its 2.5% for each agent.

I think it makes sense to specify the split as well. When we sold I think it was 2 (listing agent) and 2.5% (selling agent - who actually represents the buyer). There was less than 1 month inventory on the market so basically we had three agents "bidding" for our listing.

The agent we selected more than made back the reduced commission as our quick sale let him obtain some additional listings on our street.

The agent called back and said that her buyer didnt have the money to pay the additional commission and that if we didnt pay it, her buyer was going to pull the offer. Something smelled fishy there to me. I dont know if the agent and buyer are good friends and the buyer agreed to not buy the house if we didnt pay the full commission, or if the agent was willing to lie to the buyer and say we didnt accept the offer, or what. We went ahead and agreed to pay the extra commission because the offer had other details in it that was really going to help us with our situation.

I agree, It doesn't sound to me like the agent has the best interest of their buyer at heart unless this was a negotiating ploy where the buyer gets a kickback from the agent (seems unlikely).

 

[mrfeh]

I'd think you'd want as many interested buyers as possible. Why limit it to 5?

If looking to save on realtor fees, list it yourself.

 

[ivinsfan]

I'd think you'd want as many interested buyers as possible. Why limit it to 5?

If looking to save on realtor fees, list it yourself.

This worked for my sister who was buying in a hot market from a couple that was divorcing and had very little wiggle room. The buyers can all use realtors and your commission would be the 3% fee to the buyers agent. The agent works directly with you instead of another realtor, it's very doable. Some buyers just need hand holding, that's the way it is.

 

[kombat]

My goal here is to basically save the $32k in realtor fees.

Couldn't a buyer reasonably expect you to share those savings with him/her? After all, why should they pay the same price for your home as for a comparable, when the comparable is represented by a bonded professional who knows what they're doing?

That's the part that's always bothered me about FSBOs: the presumption that a realtor adds absolutely zero value, and thus the seller should get to keep the entire commission.

 

[daylatedollarshort]

There are realtors in our area who will list in the MLS and help with paperwork for a flat fee. There is also Redfin, where sellers agents are full service but paid a salary not a commission.

 

[RockyMtn]

I would prefer a quick private sale as opposed to listing on mls. I would consider sharing some of my savings with a buyer if it is accomplished without using a realtor. If none of that works out I can always go the traditional route and list it with a realtor. I can't see as though I have anything to really lose giving it a try so long as I set the reserve price appropriately.

 

[daylatedollarshort]

In Freakonomics the authors had a project that showed that realtors left their own houses on the market longer than clients' homes. The realtors benefited more from the higher prices when they were making money off the net sales price of their own houses and not just the sales commission.

Around here homes will sell in one week. Doesn't that just mean the realtors are pricing the houses too low? I have never understood that as a selling point for a realtor. I could sell my house this afternoon if I sold it for $1. I think when we sell we might use the flat fee MLS people and hold out for top dollar if we are in no rush to sell.

 

[KB]

I have heard of people accepting all bids until a specific date/time and then opening and reviewing them all at the same time. That does not limit how many offers and does not put one earlier than another. I like your suggestion of requiring 10K earnest money; it should eliminate the less serious buyers.

 

[ivinsfan]

I would prefer a quick private sale as opposed to listing on mls. I would consider sharing some of my savings with a buyer if it is accomplished without using a realtor. If none of that works out I can always go the traditional route and list it with a realtor. I can't see as though I have anything to really lose giving it a try so long as I set the reserve price appropriately.

It's your house, but you said you are going to set a "minimum" price, can you be sure your "minimum" is neither too high or too low? Are you happy with a minumum price? Also, someone working without a realtor on a private sale is not a sure thing for a "quick sale". Most buyers realtors will have done some prevetting and mortgage approval to be sure they aren't wasting their time with a buyer. If you are going to share the savings, why don't you save yourself some hassle and go FSBO?

 

[RockyMtn]

It's your house, but you said you are going to set a "minimum" price, can you be sure your "minimum" is neither too high or too low? Are you happy with a minumum price? Also, someone working without a realtor on a private sale is not a sure thing for a "quick sale". Most buyers realtors will have done some prevetting and mortgage approval to be sure they aren't wasting their time with a buyer. If you are going to share the savings, why don't you save yourself some hassle and go FSBO?

Have done FSBO before and all of the showings are a hassle. I know the value of the house based on recent comps (44 homes in subdivision that are all basically exact same sf and floor plans). I will be happy with my reserve price as it will be set such that I will still be ahead of what I would clear with a realtor commission involved.

I am looking for quick sale (will require significant earnest money as part of the bid) and low hassle level (showings, etc). Seems to me the sealed bid with reserve price provides for that. If it works fine, if not what have I lost?

Thanks to all for their comments/suggestions. The bidding will start in September and will let you know how it goes.

 

[ivinsfan]

Have done FSBO before and all of the showings are a hassle. I know the value of the house based on recent comps (44 homes in subdivision that are all basically exact same sf and floor plans). I will be happy with my reserve price as it will be set such that I will still be ahead of what I would clear with a realtor commission involved.

I am looking for quick sale (will require significant earnest money as part of the bid) and low hassle level (showings, etc). Seems to me the sealed bid with reserve price provides for that. If it works fine, if not what have I lost?

Thanks to all for their comments/suggestions. The bidding will start in September and will let you know how it goes.

Sounds like you will be happy with the end result and that's all that matters, I'm certainly on board with the low hassle level! Do keep us informed, I'm curious how many of the 5 parties will put in a bid.