[parentologist]

Hope someone out there can give me some advice. We just listed a house in a Hartford inner ring suburb. On the advice of our realtor, we carefully priced it very competitively. House went active today, got an effectively slightly more than full price offer tonight, but it's only 3.5% down FHA, so it's not as strong an offer as we'd like. More showings and an open house tomorrow. I expect that we'll have multiple offers by tomorrow night. My question is, what's the best way to handle a bidding war?

Of course, I want the most I can get for the property, and the strongest offer that is most likely to go through to completion. In past, as a buyer, we've been told, "Seller's agent is calling for best and final offer", and then whoever blindly bid highest, got the property. Our response to that has been to either walk away, or to bid too closely to what we thought we could get it for, and lose the property. I would prefer a more open scenario, where the bidding parties know how high the last offer is, and have the opportunity to top it. But I don't know what is legal in CT. I love my realtor, but she is relatively new to the business, doesn't have the experience of those aggressive old birds who've been in the business thirty years. I've read on the internet about "sharp bidding" where the party can bid, "1 K more than the highest offer, up to a maximum of X amount". I've also heard about bidding going several rounds, where the seller's agent lets each buyer's agent know how high the last bid has been, and gives them the opportunity to up their offer. Can anyone give me good info on how to handle this?

[Scott R]

I can't really answer your question, but there seems to be some confusion about what the definition of "best offer" even means. You said that you already got an offer that was higher than your asking price but you weren't crazy about it because the buyer was only putting down 3.5%. In the scenario you're painting where you get multiple offers from people (good luck, BTW), you're also going to have offers which have more or less money being put down. If you're going to entertain an "open process", then it seems only fair to me that you make open not only what the offer is, but also how much each potential buyer is putting down. If your asking price is $300k and I offer $300k with 20% down and someone else offers $310k with 5% down and also wants you to pay $5k in closing costs, I wouldn't feel in the slightest bit inclined to raise my $300k offer.

However, note that if you were going to disclose all of the details about each offer, some of the potential buyers may not want to even make an offer, knowing that you'd be disclosing some of the details of their offer to other people.

[Rich Lee]

First of all, you're not currently in a multiple-offer situation. If and when you are, agents have a notification form for this scenario. You don't need to contact the buyers; your agent will. The form simply states, "You have made an offer on a property that has received multiple offers. Please take this opportunity to review your offer to make any desired changes to reflect your "best and final" offer. Once the seller has made a decision, you will be notified either way."

After you have received the amended offers, there are a few approaches you may take: 1) first in time, first in line; 2) alphabetical order; 3) highest (or best) first; 4) simultaneous. Most proceed with #4 since each potential buyer has already had an opportunity to tweak his/her offer. Of course, you could refuse them all! Some go with #3 for further tweaking (down payment percentage, closing date, other contingencies).

[JayCT]

Good information Rich. I think the OP should do what is best for themselves but I would not necessarily go for the most money. Mortgages are harder to get and some people are trying to sell another home, so the high bidder may not be in the best position to close on the house soon. It may be better to accept a slightly lower offer from a person in a better position to close faster than to wait around for a deal to close. JMHO, Jay

[kmbrewer2]

Jay Im with you.Even in situations that arent multiple bid, the problem now is getting the dough from the banks. I would demand pre approval docs from everyone even before opening a bid and go from there.I also heard something this week with regard to multiples.In these scenarios agents accuse the listing broker of favoring another say, someone in their firm.I love the idea of everyone submitting sealed bids to the sellers attorney and letting he/she open them.

[Scott R]

I forgot to mention another factor to consider when weighing an offer...You may get an offer from someone who's approval is contingent on them selling their current home. If that person already has a contract on their house, then that's one thing, but if they don't, accepting that contract means effectively taking your house off the market while you wait, and hope, that they get an offer/contract on their house (which then goes all the way through to closing).

So to tweak my scenario above, if you get an offer for $300k with no contingency clause, and another offer for $320k where that buyer still needs to find a buyer for their current house, that extra $20k may not be worth the risk.

[Yankeerose00]

if you get an offer for $300k with no contingency clause, and another offer for $320k where that buyer still needs to find a buyer for their current house, that extra $20k may not be worth the risk.

Absolutely.

I just sold my house last year and I received a couple of offers where a person had to sell their house first. In the first senerio, the buyers had an actual closing date to sell their house. That was the only reason we took their offer. Then, the week of their closing, their buyers fell through, so our deal was off.
In the 2nd offer, people offered us asking price, but they had to sell their house first AND they didn't have any buyers or offers lined up. We rejected this offer and I'm glad we did because I checked in recently and one year later their house is still on the market.

Your best bet is a clean offer where the buyers are renters and can get into your house asap.

Also, why would you care what type of loan they have? These days, with conventional loans requiring at least 10% down and sometimes 20%, FHA is very, very common. It doesn't necessarily mean that a buyer isn't qualified. There are a lot of myths out there about FHA.

The buyer of our house was a single guy who was a renter. He had an FHA loan. We closed within a month of his offer with no issues at all.

FHA is strict about appraisals, though these days, most banks are. Also, the house can't be a fixer upper. They don't want their buyers getting into a house that is going to need a new roof next month. This is smart because when the market was hot, a lot of people bought quickly and ended up in over their head with repairs and could not afford to pay their mortgage plus pay repairs.

The market is bad and honestly, consider yourself very lucky to have an offer so quickly.

Also, no buyer should be afraid to accept an FHA or VA loan. You can always continue to take backup offers. For example, we gave our buyer 30 days to close (if it took a few days longer, we would have simply wrote a new contract) and we gave ourself the option of taking backup offers. This way, we were not tied to this one buyer if the closing went into months.

In the 30 days of his offer we did get one backup offer. But that's just it. It's a backup offer. Not a kickout clause. You should give your first offer a chance to close first before then going to the backup offer. I would NEVER make an offer on a house where a seller had the option of booting me without giving me a chance to close.

[Cambium]

Take into consideration that banks are strict. They'll look at every aspect of the borrower. While you dont know much about the borrower you can ask questions that your realtor will help you find out. Such as what he does for living, does he have attorney lined up, does he have a pre approval from bank,does he need to sell something else first,ect.

Keep in mind...FHA might be scary to deal with but look at it as the borrowing not having to put a ton of money down and so they are able to afford the closing. Whether or not they have enough to pay the mortgage in the long run is not your problem.

The less money down, the easier it is to close for a buyer.

Take any offer you can now a days.