Just a few years ago, bidding wars were commonplace in our red-hot real estate market. Not bidding wars in the sense of a back-and-forth auction, where buyers were asked to top the latest offer until someone quit. Westchester’s more genteel approach was to give the competing buyers a deadline – “tomorrow by 5:00 p.m.” – to submit a sealed envelope with their highest and best offer. Highest in price, best in terms (how much in cash vs. mortgage, closing date, etc.).

Buyers hated this device. Basically, they had to bid blind, with no clue as to what the others might offer. I used to tell my buyers to figure out the most they could afford and the most the house was worth to them, then take the lower of the two numbers and offer that. Houses routinely sold for higher than the asking price, sometimes way higher.

Those days are so far gone, the market is so turned around, that recently I found myself contemplating a reverse bidding war: challenging two competing sellers to counter my buyers’ offer with their lowest and best. Here’s how it happened.

I was working with some high-end buyers who were looking in the Hudson River towns – Dobbs Ferry, Irvington, Tarrytown, Sleepy Hollow, Briarcliff Manor, Croton-on-Hudson. They had exhausted the available options in their price range and decided to just wait for new listings to come on the market. One house really tempted them, but price-wise it was too much of a stretch for them. A few months later, a house was listed that met all their criteria. They looked at it and, despite some minor drawbacks, they fell in love and put in an offer. The sellers countered, and while we were considering our next move, the house they had liked earlier dropped its price very close to the one they were now bidding on. What to do?

The buyers said that they liked the two houses equally well, they would be happy with either one. So it came down to price. They decided to buy whichever had a lower price. Hmm. A reverse bidding war. Give the two sellers until noon tomorrow to come up with the lowest price they would consider to sell their house.

I must confess, on some level the prospect of turning the tables on sellers was delicious. Don’t get me wrong. Nobody beats me as a champion of my seller clients. For at least two years I sold my listings at an average of more than 100% of the asking price. But in this case my clients were the buyers, and I couldn’t help feeling, on behalf of past buyers who’d been forced to jump through the highest-and-best hoop, that revenge would be sweet.

In the end, it wasn’t to be. I insisted that my buyers revisit both houses before launching our strategy (they hadn’t seen the first house for months), and when they did they had a clear preference. They signed contracts (!) by the end of the week. But in this buyer’s market it wouldn’t surprise me to hear that other buyers are pitting one seller against another in a reverse bidding war.

Posted By: Bruce Dollar