Phantom Bidding? Happening again?

Question

Just tossing out my 2 pennies worth here, but could this actually be happening again? Just curious if anyone here has had any experience with phantom (fake) bidding. I was listening to Ep. 41 yesterday and it mentioned it briefly, and I know that it happens on auction sites, but is it actually happening in the market again? I have placed several offers on properties before and after months on the market all of a sudden there are multiple offers? I am kind of new to this still so don’t beat me up too bad guys, it’s just a legitimate question that’s been on my mind lately.

I had a lower priced listing that recently sold and it did actually have 2 offers in one day after 8 months on market, so I know firsthand that it does and can actually happen but in my particular market, multiple offers are simply not the normal. So is there anyone in the BP community that’s ever experienced this?

Jay Hinrichs · Answer

@Thomas Parsley I just closed on a property yesterday in Charleston SC... I used an escalation clause lot came on market at 150k 3 offers ... I made my offer like @Rich Baer said 2k higher than the next offer... I got the lot for 167k... so when they went to highest and best I was the only one who used the escalation clause.. so there ya go... building another great Charleston infill home.

Russell Brazil · Answer

Thanks for the tag Rich.REOs do not accept escalation clauses at least in none of the 4 states I do business in.I always get proof of escalations. In fact I usually get the whole contract with no blackouts....but at the very least I get 3 pages...the front page with price, the page that has the seller subsidy, and the page with the buyer agents information. After I am under contract I always call that buyer agent to confirm the other bid was in fact legitimate. Only one time has someone provided me with a fraudulent 2nd contract....and let's just say my buyer made out very very well in that transaction.As far as property coming back on market....its likely just the work of a sub par listing agent. People kick out of contracts all the time...but when I'm the listing Agent I usually offer the property to the 2nd best offer before relisting. If you have to relist it might give the property a stigma, so I want to find a new buyer and not go through being lowballed when I come back on market.As Rich alluded to agents may give preference to people we know will close the deal verse the unknown, and that is part of representing the best interests of their clients. So some agents might go to someone theyve worked with before and say the number you need to beat the other offer is $X. This is why in a competitive market it is important to have an agent who has a reputation for closing deals.

Rich Baer · Answer

@Thomas ParsleyI don't know the answer to your question. Many times an Agent will "save" listings for their investor friends and ignore all other bids. It is common to the industry.@Russell BrazilMaybe Russell can help you.

Rich Baer · Answer

@Thomas ParsleyIt is not uncommon. Sellers and their Agents play games all the time. I have used an escalation clause in my offers in the past when I really wanted a property. "Buyer offers to beat highest bid by $2000, if the Seller provides the Buyer with a bona fide bid (name blacked out) and the Buyer is given one hour to confirm the bid and confirm he wants to make the higher offer."

Rich Baer · Answer

@Thomas ParsleyI often have off market deals that I share. What are you looking for, areas and price?

Thomas Parsley · Answer

@Russell Brazil @Rich Baer Thanks for the info guys. I am still looking to get my first deal going and it's definitely a lot of competition on the MLS listings and I know that some agents prefer certain deals just because they know that the Buyers "investor" and agent can close with mostly no problems. Good news is that now that I've been looking and learning for a few months I am starting to make contacts that let me know of off market deals and even past client referrals. This site has been a huge help in getting started with investments. And I always appreciate the great feedback and knowledge. Thanks

Thomas Parsley · Answer

@Rich Baer I read an interesting piece from the Ohio Board of REALTORS about the escalation clause. But getting a listing agent to even show one shred of a competing offer will never happen. Not around here anyways. I wish that was the case. I have submitted several offers on properties and been told of multiples then 2 days later the house is back on market, or it sells for less than my offer. I am still new to this and just trying to wrap my head around it all. Any idea if you can do an escalation clause on a VA REO deal? I have read the VA offer for in depth and it does not mention that you "can't" do it. I like the idea of the clause but I'm not sure if it will fly on VA deals.