Profile picture for daycd

What is going on here?

We put in a bid on a house but did not get it.

It was very strange since the selling realtor had initiated (verbally) the process of putting out counter bids since there were multiple offers.  Our realtor had even put together the paperwork to increase our offer and was waiting with us at midnight to fax it back. Next we hear there will be no competitive bids, there is already an accepted offer.

We subsequently discovered that it sold for asking price while our offer was 5K more than asking price and with no contingencies except for the normal house inspection.

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July 13 2011 - Town of Madison
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Profile picture for daycd
I should add, is this fairly normal when buying houses?
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July 13 2011
Nothing in this business is "normal" anymore.

Happy funding, Rudi
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July 13 2011
That's a tough situation, one that doesn't come up all too often in todays market, but it does happen. Its understandable why you would be frustrated and confused as to what happened.

Without knowing all the details it's hard to say what really happened but there are a few things that could have happened, sometimes a seller would prefer terms that might be more valuable than the extra money like a cash offer, a specific closing date, or no home inspection.

Also, a buyer could have submitted an offer with response deadline of a couple of hours that was attractive enough for the sellers to accept without considering other offers.

Again, all just possible examples of what could have happened and Im sure there are a couple of other valid options as well.

All that to say, if there is a house that my buyers are in love with and dont want to lose, I suggest to them to make their best offer right away.

Best of luck as you continue your house search.

-Matt
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July 13 2011
Your situation isn't at all typical.

When you say it "subsequently sold" do you mean it already closed, and now you know the sale price,  or that you heard this was the price?

In any event, your agent could/should have jumped all over this right away..........and placed a call to the Broker if answers weren't forthcoming from the listing agent.
At the very least, your offer should have been presented. You were given a counter offer and should have been allowed the courtesy of responding.

By any chance did the listing agent have the buyer?
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July 13 2011
Profile picture for daycd
First, thanks for the great suggestions and help. I think I need to clarify the timeline.

1) First bid went in (we now know it as for asking price), deadline of 7pm.

2) Our bid went in before the 7pm deadline (5k over asking price), with a deadline of 12pm.

3) Third bid came in ( I do not know the details)

4) Then there was talk of a counter offer being sent to us at 10:30 pm (this was all after the 7pm deadline). The group with the third offer declined to raise their bid but our realtor indicated that we wanted to increase our bid.

5) No counter offer arrived and our realtor phoned up the selling realtor who told him that the first bid had been accepted by the owner.

I had not considered a cash offer as a term to make an offer stronger. But why is this better than the money from a lending bank at closing?

We had a closing date of three weeks from the offer date. We thought that seemed pretty short, would a shorter time be even better?

We did have a home inspection as one of the terms of the offer.  Our realtor told us this was completely standard, so we didn't think that would send up any red flags. Would it be a lot better not to have this as a term?
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July 13 2011
Profile picture for daycd
"By any chance did the listing agent have the buyer?"

No, first bidder and the owner had different agents, but they were from the same company. Our agent was from a different company. 
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July 13 2011
You said initially that you had "no contingencies" except  for a home inspection.
If you required a mortgage, then I will assume this was an additional contingecy...that your contact was subject to a home inspection, and a mortgage commitment.

"I had not considered a cash offer as a term to make an offer stronger. But why is this better than the money from a lending bank at closing.."

Yes, a cash offer makes an offer MUCH stronger.
Why?
Well, because with an all cash deal, the seller knows he has a deal, right from the beginning, and doesn't have to wait 15, 30 or 45 days  to see if a bank will give a firm commitment.
Banks today can be unpredictible...there can be delays...........issues can pop up when you don't expect it...........that's why a contract with no mortgage contingency is worth more to the seller.

If the first bidders waived a mortgage contingency, that very well may have been why the sellers grabbed that deal.
I have had sellers take less money in order to have that contingency waived.

Good luck on the next one!!

Remember, do NOT waive a mortgage contingency, just to make your contract stronger,  unless you actually have the cash to back it up.......you do NOT want to get stranded if there is a problem with the mortgage. You could risk losing your deposit money....and more.
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July 13 2011
Profile picture for daycd
Ah, now I see what you mean by cash. Yes we had a commitment from the bank, we did not have a mortgage contingency in our offer. Sorry for the confusion.
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July 13 2011
I have to agree, nothing is normal in the market today.  You have to look at the situtation this way.........maybe this was not the right house for you.  I have seen this happen too many times.  The right house is just around the corner.  Do not get frustrasted and continue looking.

You WILL find the perfect property.  Good Luck 
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July 14 2011
Profile picture for Pasadenan
"You WILL find the perfect property" -

There is no such thing as a "perfect" property... all properties have "issues".  Sure, sometimes you won't know about some of the issues until you have been at the property for a number of years; but the issues are there.

One is not looking for "perfection"; they are looking for a good match, and good features for the price range.  If one insists on "perfection", they will become procrastinators and not get anything accomplished.
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July 14 2011
Daycd...............You said you already  have a mortgage commitment - did you not have an appraisal contingency in your contract??
One suggestion -
next time you make an offer - discuss this with your agent......at the very least, even if you have a full mortgage commitment in hand, and decide to waive that contingency, it will be subject to an appraisal..........the house MUST appraise out, or you may not get the loan.
You should be protected by having some verbiage in the contract  that says the house must appraise out at the sale price!

In any event - with a mortgage- based offer versus an all cash deal....(all other terms equal).......the all cash deal wins...and can even win if it's a few dollars less than the other offer.

Good luck next time around!
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July 14 2011
"...our realtor indicated that we wanted to increase our bid." Why didn't you just counter your own offer instead of waiting for the seller to counter you?  You mentioned about verbally initiating a counter - verbal means nothing in the State of Wisconsin all contracts must be written.  The listing agent could have stated that they expected the seller to counter the offer(s), but the seller doesn't have to. 

Every time my client is in a competing situation I tell them how many offers are on the table (if that information has been provided to me), ask if they want to compete in getting this home or do they just want to let their offer "ride" and see what happens.  There have been many times where my client has said this is the house I want and I'll do what I need to get it - that's when I counter my own offer instead of waiting for the seller.  (In bank owned/foreclosed properties, the selling agent not the listing agent drafts the counter offer.)  Sometimes my buyer doesn't get the house after they have made their very best offer.

You'll get the next one!
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July 14 2011
More than once I have seen the sale go to a bidder that was not the highest bidder.

While sellers may not give away their home, a lower bid of all cash is appealing against a higher financed bid.  There is no 3rd party to say "Sorry, We Can't Loan You THe Money We Promised We Would". 

So,  Cash is King so to speak.
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July 15 2011
Profile picture for daycd
It has been very helpful for me to hear all these ideas and also helping me get an idea of all the terminology and scenarios.  I'm very impressed by the feedback from the members of this site. Thank you to all of your suggestions here.  
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July 16 2011
Daycd - thank YOU for your continued interaction and feedback!

Often the person posting the question remains silent and unresponsive to comments. It's nice to hear the feedback - especially when it has been helpful!

Good luck to you, and have a great weekend!
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July 16 2011
I had a very similar thing happen to my clients in the opposite manner.  We where 10k below asking and the other offer was full price but had some odd contingencies.  We ended up getting th house so who knows why sellers do what they do, but I will tell you in multiple offer situations the terms are the deal makers or breakers. 
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July 16 2011
Profile picture for daycd
Interesting, but in this case we were the high bid and the one with no odd contingencies. Subsequently, I have found out that the lower bid had a contingency on the mortgage, which had not been agreed to by their bank at the time.  I have also heard that they could not possibly increase their offer. 
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July 16 2011
Profile picture for wetdawgs
Accepting  offers on a house has a lot more than highest price and lowest contingencies.  At the moment you are hearing (from your Realtor?) a lot of hearsay.  You really don't know.  (In fact, the agents should not be feeding you this information or speculation.)      There may be other reasons the lower offer was accepted - a relative? A family friend?   A friend of a friend?    Tarot cards?

In one case we won a bid war without the highest/best offer.   The reason (the seller told us in person) was that Ms Wetdawgs had the same first name as the favorite sister of the seller.  The sister had just died, so the seller took the name as a positive sign. 


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July 16 2011
Profile picture for daycd
Actually, we're hearing it from the other buyer.  It turns out we know them well, although we did not know that at the time.  I'm just trying to figure out what might have happened to swing the deal in their favor. What ever strategy their realtor used worked very well. 
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July 16 2011
 
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