I'm on the good side of a bidding war. Now what?

Question

I’m trying to sell a property and now have multiple parties interested. I’ve never been in this position before so I don’t know the best way to proceed.

I have one buyer who is ready to sign a contract. The other two are still doing their due diligence, which may take 2-3 weeks (waiting on soil test results). Do I make “ready to sign" guy wait until the due diligence guys are finished and then call for highest and best offers? If I make “ready to sign” guy wait then I may lose him; he is anxious to get moving. And if he bails, then what if due diligence guys change their minds after doing their research? I could go back to “ready to sign” guy, but he may have found another property by then.

Also, what are the unspoken rules of negotiating a bidding war? Do I let the other parties know what the current offer is? Or do I just keep quiet and ask for highest and best (which to me doesn’t seem that easy, given the situation above)? Do any of you seasoned sellers have some tactics for keeping things fair without losing your bidders and your chance for extra profit?

Max T. · Answer

Shouldn't the soil testers be writing an offer contingent upon the results of the tests?

I always get the property under contract before hiring an inspection, termite report, other due diligence...

Zac Caudell · Answer

@Kyle J.

@Jesse T.

All great stuff, guys. Thanks for your input. I have heard the pig vs. hog saying and it has a lot of merit. I don't intend to get greedy here by jacking up the price; I have enough profit built in already. There's no sense in putting that profit in jeopardy by trying to get more. That being said, if two people want to duke it out over price then I'm not gonna stop them, as long as there's a guaranteed winner.

My main concern is offering a fair fight to all interested parties. I don't want a buyer to miss out just because he called me 5 minutes later than the other guy, or just because the county took longer to process his soil test results. But then again, I guess that's just business, or just life, or however you want to say it.

I think the idea of getting them to sign something first is the way to go. I suppose I can just create a deadline, say midnight tomorrow, and then choose the best offer that comes in. This will be my first deal without my real estate agent (not enough profit to justify a commission) so that's one reason why I'm so nervous about everything. Thankfully, I do have a great attorney on my team who can help make sure that I don't get slaughtered.

Jesse T. · Answer

I think step 1 is to get something in writing from "ready to sign guy".  Until you sign it, what he has submitted is an offer.

Ask shoppers 2 and 3 if they want to submit contingent offers on the soil tests.  If you accept a contingent offer from 2 or 3, I would keep the offer from 1 as a back-up offer - assuming he is willing to wait.

It may be worth hiring a real estate lawyer or agent on an hourly rate to handle the transaction.

Kyle J. · Answer

It doesn't sound like a "bidding war" since no one has given you a written offer yet.  At this point you just have multiple people who have verbally expressed interest.  You don't say how much the "ready to sign" guy is willing to offer or how close that offer would be to your asking price, but just keep in mind that a bird in the hand beats two in the bush.  Those other potential offers from the due diligence/soil testers may never materialize.

In my experience as a landlord, I typically get a lot of people who say they are very interested or even that they definitely want to rent my house, yet never even turn in a written application.  Some people just talk.  Others act.

If you have a guy who is truly ready to move on the property and sign a written contract, then personally I'd go with that guy (assuming his offer is acceptable to you).  To quote another common saying, pigs get fat and hogs get slaughtered.  So don't be the hog.  :)

Good luck with whatever you decide.

Zac Caudell · Answer

I'm sorry if my generalization sounded a bit elitist. That was not my intention. What I meant was that most of my buyers don't consider real estate investing to be their full or part time job. With that, they are not immediately concerned with how much money they will profit after buying this land. They are more concerned with how they will use it, how its topography and other features will affect that use, and is the price worth it. In saying all of that, I was meaning to imply that their concern over the specifics of a due diligence clause might be less than that of someone who is doing due diligence on multiple properties at once, multiple times every month. But who knows, I could be totally wrong in that assumption anyways.

Each of these buyers are doing their own due diligence prior to making an offer. Due diligence verbiage is standard in a contract in GA, however, none of these buyers are using a buyer's agent and, as a result, their offers are not arriving in the form of contracts. Instead they are making verbal offers to me over the phone. I just take their offer price and contingencies and insert them into the contract form that I use for selling properties.

Thanks for confirming the part about keeping the offers secret. I was assuming that was best (and morally right), but I had a guy ask me what the other offer was and I was caught off guard and didn't know how to respond. Having never been in this position before didn't help either.

Karen Margrave · Answer

@Zac Caudell

I'm not sure why so many on BP think that "Real Estate Investors" are a separate class of people. If someone invests their money into a parcel, a home, etc. they are "real estate investors". It doesn't matter if they are builders, homeowners, buy/hold investors, fix/flip, or a variety of other niche investors.

Anyone investing into real estate with any sense is going to want to do some type of due diligence, and should make their highest and best offer, with the condition that they have a set number of days to complete their due diligence. Here in California our contracts have that verbage as standard, allowing people to choose the number of days for various things, etc.

I don't know your real estate laws in Georgia, but I cannot imagine that the seller controls what can or cannot be stipulated in a contract, or the contract that an buyer can use. It is the BUYER that makes the offer, not the seller.

The proper thing to do is tell all of the parties involved that there are multiple offers, and to make their highest and best offer, including all contingencies, and you will decide which to accept. Then do it. Also, NO you do NOT tell the others what each is offering, that would be unethical.

Zac Caudell · Answer

That's a good point, but in general, I'm not dealing with real estate investors. These buyers mainly just fall into the "general public". The property is vacant land so the buyers are people who just want to own some land, people who want to build there one day, or contractors who want to build a spec house.

Currently, my contract doesn't allow for due diligence. It states that the buyer is responsible for independently verifying any information about the property prior to signing. So far this hasn't caused any problems, but if it does in the future then I may add in the due diligence clause.

Jose Salcedo · Answer

I would ask "ready to sign guy" if this is his best offer because you do have other parties interested.  Once you have that answer revisit your options.  Two other parties performing their due diligence can be asked to submit an offer sooner because you are making a decision by the end of the week  but I would advise against it if your "ready to sign guy" didn't performed his own due diligence then I'll just say wait.  Best of luck!

I'm on the good side of a bidding war. Now what?

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