Here you go. The bidding war. The original offer for a park was 3.2mm. Other company offered 3.25. We offered more. Back and forth, back and forth. Now we are up to 4mm. I know it sounds crazy but it looks like other company trying to put the property under contract and renegotiate down the road. The realistic price for the park is 3.5mm.
My question is: what will you do in this situation?
Option A: just win “the war” by offering the higher amount and renegotiate later
Option B: just tell them the final offer and let them decide.
Option C: any other thoughts?
I personally think I’d need to know more to opine. Valuation, occupancy, utilities, upside in rents, market, etc. I.e. going from a 10 to an 8 that still has upside is very different than going from an 8 to a 6 with minimal upside. Financing details also would be helpful.
Of your 3 options, none of them take into effect that the sellers are humans with emotions. Part of bonding is being honest real with the people, and honestly trying to help them. Be vulnerable to loosing the deal, your acting too aggressive and acting like your willing to overpay.
I would tell them what you think the other party is doing. I would tell them that you intend to close the deal. I would also tell them that if they go with the other parties offer, that the seller can come back to you when the other buyer starts to jerk them around. I would even check in with the sellers in a month and see if the other deal has fallen about.
Just remember to say all this in such a way that will make them feel secure with dealing with you, and also so that when the other deal goes south, the sellers will think" Gee I should have just went with the other guy, we could have closed by now and now I am starting from square one, I think I’ll call that other guy"
I’ve bought a handful of parks and the one thing I have learned is to treat the sellers like humans, not a object in the way of you getting what you want.
If you go with option A, the other company will be waiting on the side lines to see if they can jump back in after you try to drop the price down and make the seller mad.
I would much rather be in their shoes than your shoes in that situation.
I would list my final price that I’m actually willing to pay for the property given all info disclosed, and then check back in with the seller/broker every few weeks and see if the sale is closing.
I would choose option B. If they go with the other party let them know your offer will stand.
Based on the numbers being tossed around I doubt there are any human emotions involved in this negotiation.
Unfortunately there’s not much you can do in this situation. We’ve had half a dozen off-market deals find their way into a bidding war over the past couple of years. It always ends the same way - it gets bid up right about to where it would be if a broker listed it, which tends to be just a bit more than we are willing to pay for it. It’s a helpless feeling because you lose about 99% control of the situation once the “bidding war” begins.
Definitely option B and not option A. Give an expiration date on your offer (typical time frame 1 week) and if it’s not accepted move on. You can call back in a month or two and see if it’s still under contract but I’d say “Call me if the other deal falls through” and move on without keeping it on my desk.
I’ve never faced this situation. Generally, I like to hold at what works for me and stretch only if it’s worth it. Renegotiating because you never intended to pay your offer price - might work a few times, but seems like a losing strategy to your reputation.
How about offering better terms?
If you suspect the other guy’s going to ‘renegotiate’, how about offering a 30 day due diligence period and then the earnest money goes hard. After that, no more renegotiations and you get another 30-45 days for financing to come through (financing contingency).
Then the seller can go to the other buyer and see if they’ll match terms.
If the other buyer won’t match terms because they want to stretch things out to strengthen their renegotiation position, then at least the seller will know that’s a potential risk.
If the other buyer matches, at least in 30 days, the seller will know if the buyers is full of it or really going to close at the stated price and if the buyer wants to renegotiate, seller can go back to you and only have wasted 30 days.
Or you can offer more earnest money down. Then if the other buyer has to match, that puts him in a riskier position, because if he tries to renegotiate later and the seller says No (because he realizes that they’ve fooled him) then the buyer will have had more capital not being used productively.
Thank you very much it is a great advice. We deal with lawyers. However, I can write a letter to the owner and explain him everithing in details. Your advice is very valuable.
Thank you