Bidding Wars

I was outbid a number of times and I'm extremely glad I didn't chase those prices. Was once depressed for two weeks after losing out on a place, but ultimately wound up in something much better.

Took my time and waited for the one that I both loved and knew I was getting a good price on. Took years but totally worth it.

If you understand what you're willing to pay for an apartment, why would you offer to pay more than that? Let someone else overpay. (As the bubble proves, just because someone else is willing to pay an inflated price doesn't mean it's a good idea for you to do so.)

I don't mind putting in a bid when I know there are competing offer. Have done firm and final in a second round of bids (and lost). Just don't bid over what you are willing to pay or what you feel the place is worth -- you might "love" the place and will be depressed if you lose out, but that's normal. Unless it's one of those few truly unique properties wait a few days or weeks and another comparable property will enter the market.

Lost to a higher bidder for a good sized studio over a year ago and never did find a comparable apartment in that price range. Settled for something smaller because the price was such I could pay all cash. There were few choices for west side, doorman buildings.

Tenemental, you finally pulled the trigger! CONGRATS! Tell us more?

Juice! How's the little guy? A lot less little than the last time I asked, I bet.

The new place is great, much bigger & nicer than than my old apt. Immediate location is a little less sexy than the old block, but it's a short walk to old haunts and there are no meatheads howling outside my windows. Beat peak comps by 30%, beat rent vs buy. The place was horribly marketed and staged and I was able to take advantage of competition from another unit in the bldg and some good timing.

Hope you're doing well.

Last year I lost one bidding war and won another. The first time around, the bidding went to "best and final" and the winning bidder gunned us out of the water by going 10% over ask. This actually made us feel better about losing -- it was clear the other bidder really, really wanted the place.

The second time around, the apartment in question drew 3-4 bidders after it had been on the market about a week. We didn't bid more than we thought the apartment was worth to win, but I have to admit that, given the level of interest, we were more comfortable bidding near the asking price than we would have been if the place had been sitting for a while.

Bidding wars are psychologically grueling, but I'd never adopt a "no bidding war" policy -- largely because appealing places that are well-priced are the most likely to spur competitive bids. But you have to know that you can stop yourself when the bidding goes beyond what you think a place is truly worth.

Congrats tenemental. Way to not get in a bidding war post a bubbble popping. Bid wars in this market are for lemmings. Don't be a stalking horse.

I appreciate everyone's insight and also their patience in figuring out what I was really trying to ask when I wrote this not very clearly written inquiry.

I was trying to ask other buyers under which circumstances they would consider engaging in a bidding war. Sometimes a seller intentionally prices an apartment under market to generate alot of interest. Other times, as Miette noted, someone really wants an apartment and will outbid everyone to get it. It seems to me that with co-ops more than condos, a seller might choose a buyer whom they feel will easily get approved by the co-op board even if the bid is slightly lower. With a condo, outbidding other buyers might be the only way to get an apartment you really want unless your competition is an all-cash buyer.

can bidding wars be faked like they are during regular auctions? a friend of the sellers claims interest on the property to try to get the interested buyer to pay up more?

You need to know your market. A friend of mine who was once one of Manhattan's top appraisers over-
appraised a coop by 200% based on fraudulent interna; building comps manufactured by a sundicate
that was using fraudulently obtained powers of attorney to create ever higher comps.

Units like his that had been appraised for $300,000 plus in 1985-1986 were sold by their lenders in
1987-1988 for $75,000, after which they hit a maximum resale price of $110,000.

> Units like his that had been appraised for $300,000 plus in 1985-1986 were sold by their lenders in
1987-1988 for $75,000, after which they hit a maximum resale price of $110,000.

fantastic numbers! they really put things in perspective.

BTW there's nothing like a good memory , congrats!

On our unit, we were outbid by 3 buyers by 20k to 90k. Agent asked for best and finals. We raised our bid by 30k beyond our comfort zone (but still w/in our affordable zone) and lost. A few mos later, we got the unit at our last offer bc 1st bidder failed board, 2nd bidder got cold feet and failed to sign contract. At that pt, seller wanted the buyer most likely to close and we had the only offer with no contingencies. It appraised at the high bidder's offer amount. Stick to your guns.

REMom, how do you know that the buyer that fall through wasn't a friend of the seller trying to help out getting more $ from you? it cost nothing to submit a bid, right?

REMon, hate to tell you that is a classic game... and one in which I would have countered back at original bid minus 5% if at all. Sorry, about you loss.

After the popping of the greatest bubble in nyc re, who the f'k becomes a stalking horse much less even goes into a best/final? It's just plain stupid.

rb345, very true... fake closings all around. Lowball like hell, don't leave money on the table. I always tell broker, if they don't like lowballs, just keep the apt unlisted. Tell sellers don't get emotional, it's just s trade.

If the apartment went into contract and the seller came back to REMom "a few months" later, chances are at least one of the other bidders was legit and it wasn't just a game.

I stand by my original comment that it's sometimes worthwhile to enter a bidding war, so long as you trust yourself not to bid beyond what you truly think is reasonable for the apartment. It's the best-priced places that tend to draw multiple bidders; why would you want to limit your options by excluding those?

NYC RE IS ILLIQUID. A few months watching the market go down and you turn around and say, yeah I'll take lemming offer #3. Said lemming says "thank ALLAH I waited!"?

Miette, let's not dance around each other. If a listing says bank approved short sale! "looking for back up offers" would you bid?

Whether or not a buyer should be willing to take a place at their earlier offer price depends on the place, the price, and their view of the market. Clearly if you view everyone buying now as a lemming you will always view it as a bad idea if a buyer goes through with a bid from three months ago, or engages in a bidding war, or buys at all. If one doesn't view buying now as unequivocally a bad idea the inquiry has to be a bit more nuanced.

Yeah, I don't ever see a compelling reason to get into a bidding war where the price has clearly exceeded your threshold. That's tying too much emotion to one particular property, when in all likelihood there are other units out there that suit your needs just as well, if not better. The one time I was tempted was on a rather unique and very charming 2BR in Nolita (where it's rare to find decently priced, nice units). I went just a bit over my allotted max when I saw so many bids coming in, but the place ended going for well over ask, at a price that was, to be polite, unreasonable. And like tenemental, I'm quite glad it worked out that way. It's too easy to see the buying process through the eyes of competition, but it really should have little to do with that. You should focus on your needs and your finances - not other potential buyers.

Miette, okay. So you believe that nyc re mkt has bottomed or that you can get a deal worthy enough that when it hits bottom you won't regret it based on your negotiating savvy. The last time we had a re bubble like today it was in 1989.. in 1994-2000, the gov't set up RTC (recovery trust corporation) to liquidate all the bad re assets on all the failed S&L. That was a magnitude smaller.

We bid on and won several of these "assets". The gov't was selling assets at 90% below their book vale, 15% of new construction cost, with 10% cash on cash yield.... and yet there was NEVER a bidding war. It was a micro-deflation situation, where everyone was looking for the 20% Cash on cash yielders... 10% cash yielders were a dime a dozen.

We had a bubble, yes? RE is illquid, yes? Gov't put in $trillions of dollars to support RE post bubble, no? The stimulus just ended June 30, 2010, no? When do you think in this credit cycle bursting do you think I will teach my daughter to get into a bidding war?

My daughter's name is notlemming1.

Lesson #1 -- Multiple bids, especially in this environment, do not mean high bids. We saw four units that went into multiple bid situations in February/March. ALL of them closed 2-5% under ask.

Lesson #2 -- Do not bid against yourself. In the unit we bought, we knew that three offers were coming in from the broker. (The open house traffic also indicated extremely high interest). Knowing we were in competition, we went in with our best and final and hoped to "clear the field" by crossing a psychological price point for the seller.

The seller countered our initial offer by saying we could have the apartment immediately if we split the difference between the asking price and our bid, or else all three bidders would be asked for best and final. We said our original offer was our best and final, emphasized our qualifications that would present well to a co-op board, and said we'd leave the bid open for 12 hours. A couple of hours later, the seller accepted the original offer.

Good properties get multiple interests, but you have to be true to what you can manage. Keep to your wishful purchase price and your max purchase price with weighing how much emotion you have on the place getting you to that max price. But stick to your max price.

As a substancial amount of "in contracts" end up as failed closings 90 days later, some maybe for financing, some for not passing some board or some to just change of heart, there is also the chance that unit was in a "false" bidding war where a buyer "didn't play" and forced the sellers/brokers to fold without showing the hole card. Listing it "in contract" whether it is or not provides a nice "out."
Patience in a stagnant market is essential.

> REMon, hate to tell you that is a classic game... and one in which I would have countered back at original bid minus 5% if at all. Sorry, about you loss.

that's what i'd do. say "sorry, my situation had changed during these 3 months, I committed part of the capital on other investments, now I can offer you 10% for it. the offer expires in a week"

what do you think 67w? i'm your most faithful student!

Why would anyone get into a bidding war these days above ask, unless the difference didn't matter much to you? And, maybe they do happen, but why would you assume that it was real and participate? I did note that Andrew Sorkin just paid above ask, but I guess he thinks he's got an image to maintain.

I have to say that truthskr10's statement that "patience in a stagnant market is essential" has become my new mantra and something that I am going to repeat to myself each day because it is so true. As many of you have noted,desirable properties which are realistically priced in this market will likely generate interest from multiple bidders. Miette's observation that it is fine to be one of those bidders so long as you know when to stop bidding is wise. Bjw is correct that a buyer should focus on their own finances and property requirements instead of the competition. Lad's comments that multiple bids may not necessarily be over ask and especially not to bid against yourself is excellent advice.

I was tempted a few months ago to put in an additional bid which was higher than I was comfortable bidding. Instead, I walked away from the apartment which in retrospect was a very very good but not perfect apartment and certainly not unique in NYC.

> I was tempted a few months ago to put in an additional bid which was higher than I was comfortable bidding. Instead, I walked away from the apartment which in retrospect was a very very good but not perfect apartment and certainly not unique in NYC.

well done! my gut feeling is that we are not even closer to have really good deals on the market. if you are willing to do a reno, on a declining mkt estate sales might provide the best value. again, we are not even close to capitulation imho. in my view, the econ is not really "coming back" and the new normal will suck for many.

I only bid on Long Island City. The whole place for $1.95.

Takers?

I actually think that most of NYC is still horribly overpriced. For me the only deal that made sense was one in which there were factors that kept the price well below the apartment's true worth. Others have discussed this on threads about buying wrecks. In my case, it was a unit that looked like it needed much more work than it actually did, and was marketed poorly enough that its positive qualities were not obvious to potential buyers. Timing was, of course, hugely important as well.

tenemental, very, very happy for you. All of that research and patience paid off. I know you will miss the howling meatheads, but everything else sounds great. Bravo.

tenemental, the "undermarketed" approach is really interesting and not one that I've ever really heard around these parts. Taking advantage of market inefficiencies - I like it! It involves a bit more work obviously, but it can pay off. Out of curiosity, was the listing on Streeteasy? Smaller or larger brokerage?

W67, if we got played, we are very happy we did. The place appraised for the high bid ($60k more than we paid) and appraised for $250k more than we paid when we did our refi last fall. In the end, we never bid more than we could afford and it was a cheaper than anything comparable we saw. There was a bidding war bc it was priced below market. It was priced below market bc it showed so poorly and owner, who had already moved to California, didn't want to invest $ to fix it up.

Congrats, REMom.

Thanks again, Juice. It does feel weird to sleep straight through the night, but I think I can get used to it.

bjw, I think it's been discussed here in the context of apts that need gut renos and wind up providing good value with costs factored in vs. similar apartments in better shape. In my case, I think other buyers thought "gut reno" when they saw it, but I knew that many of the problems were superficial. We got it into a shape we love for a low 5-figures. Folks who have seen it before & after can't believe the transformation.

On another note, Doug Heddings, on his True Gotham blog, once wrote that all three (I think it's three) of his purchases were listings he came across while searching for clients. All had gone stale for reasons he couldn't figure, and he felt he was able to get great deals. I always searched Craigslist, even though it was a slog, because there were FSBOs and former HDFC units listed there by folks who didn't want to or couldn't spring for a paid ad, and there are brokers on that beat who charge lower fees and usually don't co-broke, though their clients would probably been better off with a higher fee and greater exposure. I know two posters here who bought apartments like that, one straight off CL, the other for 5% more than the old asking price when it went to a major brokerage.

I don't want to say too much about my listing, but the broker really phoned it in. I'm sure plenty of people glossed right over it. I watched it sit for months, and when a similar unit in worse condition (though most buyers probably thought they needed equal work) appeared, I watched them chase each other down for a while and then made a lowball offer. From that point on, let's just say I owe Kylewest a box of cigars for his negotiations thread.

Tenemental:

I've been reading the Downtown comp thread and I can see how much work you put into your apartment search. I'm curious, if you don't mind, about how you learned to recognize an apartment which most buyers would think needed a gut reno but upon very close inspection required much less work. Reading SE, especially the very informative comp threads, has helped me better recognize the acceptable range for prices.

Thanks.

In 2007 we got into a bidding war for our apartment. Essentially the seller verbally accepted our bid. A day later, we were told that another buyer was going to make a higher offer. Rather than blindly make a counter-offer to top the other buyer's at a price we still did not yet know, we offered the sellers to pay 5% more than the offer of the other buyers. (We were sure we wanted the place.)
This strategy of making a counter-offer based on a percentage seemed wise, since none of these agreements were in writing and since we had no way to guess what the other buyers would be offering. We figured that if the price was too high for us after our counter-offer (the price offered by other buyers + 5% of that), we could back out. We didn't and got the place!

Gilly, it's a good strategy to offer a certain percentage over your competitor's bid if you're certain that you want the apartment (2-5% depending on listing price). The "best and final" technique employed by brokers seems full of loopholes to me - your method seems more definitive. Good suggestion.

Lobster:

The problem with bid-plus pricing is that you generally cant reliably determine what other bidders offer - or even if they exist.There is an element of bluffing in many price negotiations, and sellers can end up conducting highest-and-final bidding wars with only one bidder, which I once did with good results.

LOL, rb345. Hopefully, that story will help some people out here on the board.

Lobster:

I wouldn't be able to afford a mint-condition place in the neighborhoods I prefer in the size I wanted, so personal tolerances definitely come in to play. I like a lived-in place with character (real character, which we were able to bring. not busted-so-let's-call-it-character character), and as much as I appreciate the "wow" factor you get in many new developments, it was low on my priority list. So, a few examples: The bathroom was outfitted with cheap plastic things you would find in a 99-cent store, and it was a bit worn but not drastically so. A couple hundred dollars at B, B & B and a good scrubbing later and it's fine (cute, actually), better than those in a lot of open houses I went to. The electrical had been partially updated, including the panel, so I knew it wouldn't be a massive job to bring up the rest (it was all original electrical in the other unit). The kitchen had the ugliest floor in the history of linoleum, but we retiled and painted ourselves. A couple grand for some GE stainless appliances (which have been great, BTW) and some cabinet handles to go with the paint job and we love it. Floors in both apartments needed replacing, but while the walls in my place just needed painting (yeah, some people might have required skim-coating, but I don't mind a little history under my colors), the other place felt unhygienic. It smelled. Things were worn through. My place had piles of stuff lying around that the broker should have removed, but the other place had problems that discarding and cleaning couldn't fix. Subjectively, my place made a somewhat similar impression, but if you stepped back and considered the comparatively small cost and effort required it was clearly worth it. Also, the other apt had a quality that is generally considered a plus in RE (sorry, but I don't want to get too specific), but in our building's particular setting, our place worked much better.

rb345, agreed.

rb345, I realized that what you're saying is a definite possibility and it also goes to lad's argument that you shouldn't bid against yourself. I don't want to get into specifics, but in my own case, I had a situation where there were several other bidders besides myself and "best and final" was merely used to get the bid up so that the first bidder was "allowed" to match the highest price. In limited cases, I think it's a good strategy but for condos only. I'm sure many on SE will disagree but in my own case, it would have been a better option. How do you ever really know if there is one or more other bidders until an apartment is sold and shows up on Acris/SE?

tenemental, thanks for detailing your process. Apartments which need alot of work are often a good value, but the amount of work needed can seen daunting. To find an apartment which needs less work than most would think and to create a beautiful home at a reasonable purchase/renovation price seems ideal to me.

Why condos only?

1. bidding wars can be very tricky
2. you often cant really know what's actually going on until an offer is accepted
3. in late December I offered about $19,000 and change for a 1068 ft. condo REO, out-of-state
4. the seller's broke sat on my offer for weeks, and told my broker she had 18-20 other offers
5. I dont like because kept and used as someone's fallback
6. so I had a friend from California call the selling broker to find out what was really going on
7. he reported back that there truly appeared to be 18-20 other offers
8. in response, I instructed my nroker to LOWER MY OFFER BY 10%
9. and to send a fax at 5:30 PM stating that my offer would be void unless accepted by 11AM the bext day
10, at 10:00 the next day my broker received a fax saying that my offer had been accepted
11. shortly thereafter I offered a different seller $29,000 on a larger, nearby townhouse
12. when they dithered amidst talk of other offers, I withdrew it
13. two weeks later, same unit reappearedon realtor.com at a slightly lower price
14. atfer seeing that posting, I again reduced my offer by 10%
15. that second offer eas accepted almost immediately