What did you just say Mike!?

That’s right, my headline is correct. It’s time to end the process of blind bidding when a property is listed for sale and there is a set date for an offer(s) presentation.

Way back in the mid 1990’s when I started out in real estate, the sometime-used marketing tactic to list a property slightly below it’s market value, then setting an offer presentation time one week away, was used in situations that were considered unique.

A mother who had recently given birth and now at home with an infant child not wanting later evening showings over the three-four week (or longer) time period her home would be listed, for example.

Or the elderly couple or widower whose agent wanted to shelter them from constant pestering of questioning by agents and prospective buyers.

And finally the sell under duress for a variety of reasons: already purchased another property. Or were behind on mortgage payments to the bank and the threat of power of sale was right around the corner.

I’ve experienced all of the above and more at the time, and back then the real estate market was still reeling from the crash of 1989-1990. Properties almost always took 30+ days to sell and that was considered the norm. When the occasional listing came out where the sellers were holding back on offers, it was communicated and most of the time the reasoning was understood.

My very first sale was one in which I was up against two other agents. A small 2-bedroom bungalow in East York where we were the winning offer. We paid $159,500.00 which was $500.00 over the list price. And we got it accepted with conditions for 5 days on finance condition and a home inspection.

That’s how multiple offers and blind bidding worked back then. Fast forward to now and it looks more like this.

Property is listed for well under its perceived value and a presentation date is set a week away. Seller advertises that sure, they might be willing to look at a bully offer (pre-emptive offer in Realtor lingo). Seller agent may or may not order a pre-home inspection. The inspection report if done will be vague (and I don’t fault home inspectors on this as often agents do a poor job of explaining how an inspection works). Then the property hits the MLS.

As an agent who works both with sellers and buyers I have vast experience on both sides of the sales transaction. And buyers are often the ones at a huge disadvantage.

Any seller who has sold this way in the past 15 years has seen this first hand. There may be 10 offers on a property that’s listed for $899,000. and where the perceived value by the selling agent and seller is say $999,000. As an example: 1-4 of these offers will be between $899,000-$925,000. 2 will be in the mid $900,000’s. 1 offer will be great on price but have a condition (usually finance). Then 1 offer will be around the $999,000 or slightly higher. The winner will be $1,050,000 or more.

Now this by no means is this how it always goes down, but, often this can be the case. And now we are seeing the gaps even wider in the current selling environment. Sold over list prices of $500,000+ is way more common today on houses valued $1.5mil and up.

So what’s the solution? Here are a few of my suggestions for property being listed with a hold back on offer date:

• No bully offers or preemptive offers before the set time and date
• A mandatory pre home inspection carried out by an independent 3rd party inspection company (one can be created just for this) that are neither loyal to the seller or the buyer
• An appraisal to be carried out during the one week period and either made available only to those who have registered an offer, and/or a clause that allows the buyer to withdraw their offer before the presentation time if they are unhappy with the appraisal.

All of my examples are quite extreme in nature but if what was once used as a some-time-marketing tool (the holdback on offers), then it should be part of the long list of other rules licensed real estate agents have to abide by already.

I don’t think we are ready for an open auction type process as of yet, and this I will cover in a future post.

What do you think might be helpful changes that can ensure both buyers and sellers interests are being met? Supply and demand arguments aside, something has to be done, that’s for certain.