Buyers hate to bid. They want to know the price. Even when the do, a buyer will still submit an offer below the posted price. There are many reasons why buyers do this. They don’t agree with the seller’s BPO’s; their due diligence discovers the FMV is less than what the seller states; the properties are in poorer condition; perceived market fluctuations and the list goes on. One way to resolve these issues is to put it out for bid without any pricing. No! Not a bid! Why when sellers decide to put out a package for bid, buyers get revolt? Fixed price gives a buyer more control but a bid price, well, that puts the control squarely back in the seller’s hands and buyers don’t like. Believe it or not, there are more opportunities to buy via a bid then a fixed price.
Most buyers like some idea of where the buyer is with their pricing. They don’t want to waste their time putting in an offer on a package that may not be accepted. 99% of the time, banks will always put their properties out for bid, even to their approved buyers. It is these buyers that are most comfortable with a bid scenario and most likely to succeed. Those that disregard a bid opportunity usually have never bought from a bank or has yet to close on their first package.
Keep in mind that with a bid price, the chances of being the winner bidder is greater. Why? With a fixed price, your one opportunity is to meet the price as quickly as possible, offer generous terms and hope you are the first offer accepted. Often multiple offers with the same price and terms make it difficult for a buyer to decide who to sell to. It often comes down to the strength and experience of the buyer.
With a bid package, there are few barriers and greater opportunities. A bid allows multiple chances to secure the opportunity with counterbids and negotiated terms. Sure, you might have to do some preliminary due diligence and refine your offer but that’s part of the process. Most of my bid buyers can knock down their due diligence on 100 properties in half a day.
Most importantly, cash is king. As long as you can proof funds, seller does not place great emphasis on who you are, but rather on your ability to close.
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Any suggestions on successfully closing a bid with a firstime buyer.?…
Carlos,
First, buyer needs to be realistic in their pricing. Most make the mistake that only 1-2 bidders are involved in the bid process and they low ball their offers. Buyers need to come in with their best offer possible.
Second, once a buyer builds a relationship with the asset manager as a proven buyer, buyer can request the asset manager to provide the highest bids received list. Now that you have the highest bid list, you can then decide what your final bid would be. This removes a lot of the guessing game. Asset manager usually would ask the buyer for their final bid amount in increments of $250 or more above the high bid list. Once you submit your final bids, asset manager usually notifies you within 24 hrs if you are the winning bidder.
Assuming it is a small package that you can cherry pick, bids are line item and not aggregate. For example, if you are bidding on 5 properties and your aggregate price is the highest bid overall, it does not mean the bank will sell you all 5 properties. If there are 1-2 individual bids that are not the highest, the bank will only sell you the other three. You can always ask the bank you want the bid price decision to be made on an aggregate price, but very few, if any, will allow it.
Aggregate bid pricing only comes into play on large bulk sale (meaning no cherry picking). The aggregate price, should it be accepted, would offset any of the low individual bids because the buyer is required to purchase the entire package.