Would You Bet $250,000 That A Realtor Lied?

A recent splashy story by Vivian S. Toy in The New York Times argued that real estate bidding wars are back. To what extent that's happening is debatable, because some agents will tell you that bidding wars never went away on the most desirable properties.

However, there's one anecdote that really struck me. Larry Ruskin, a lowball bidder on a multi-million-dollar property, was encouraged to bring his offer up because there was another bid.

Ruskin did raise his offer, but he stated that he didn't believe in the existence of the other bid. He offered the seller $250,000 if the seller could prove that there really was another, as Toy puts it, "viable offer."

He paid.

So that got me wanting to discuss the whole "hey there's another offer" Realtor-buyer scenario. Buyers are often convinced that Realtors lie about this. When you look at human nature, surely some of them do -- but not as many as you'd think. It's a violation of our code of ethics (yes, we have one).

So why does there always seem to be "an offer on the table"? Well, it's like dating -- popularity spirals upward. To that end, when an offer comes in, a good real estate agent will keep it in play for awhile, giving him (or her) a legitimate ability to tell other candidates that the property they want is really popular.

If you come in as second bidder, you'll want to ask the other agent when the first offer was made , how much it's for, and whether the owners are giving it serious consideration. You won't get a full answer to these questions (the listing agent has obligations to the buyer and the owner that include some duties of confidentiality) but you should get some guidance.

The other scenario is that when an offer comes in, a good Realtor will immediately re-contact everyone who has seen the property who seemed somewhat interested, and try to shove them on the dance floor. When you get the "we've had an offer on property XX, which you saw two weeks ago, are you interested in bidding?" call, the agent is probably not lying. Reason: Realtors don't follow up everything. We're either too busy or too lazy, depending on how you look at it. But we do follow up "hot" trails, and if I'm listing a property where there's a bid, I'm going to call the three people who seemed most interested, and try to get one of them to be the second bidder.

If you ask if there's another offer and you hear "we've had a lot of interest" -- that could mean one of two things. Either there truly is a lot of traffic, or the agent is living in dreamland. The best way to find out which is which is to ask for specific traffic numbers ("oh, how many people did you have at the open house last week?") and to find out if any potential buyer has made a second or third visit.

My final piece of advice is that you kind of have to pretend that the other offer is not there. Your bidding strategy needs to be your bidding strategy, based on what you're willing to pay -- not what someone else is. Sometimes you're going to lose, which hurts -- but it's better than overspending your budget.

Real Estate Bidding Glossary:

"We've had a lot of interest" -- This can go two ways; it can mean little traffic, as above, or it can truly mean strong traffic full of potential bidders. Ask how many people have seen the property, and whether anyone has come back for a second visit.

"We have an offer on the table" -- There is something, but you don't know what. Try to ascertain whether it's at asking price and how long it's been sitting. Sometimes, "What would it take for me to be the winning bidder?" will get you an informative response.