Sealed Bids and Realtors

Sealed bids are used frequently when it comes to selling real estate. Brokers have been turning to the sealed bid auctions as the economy has decreased. It is  a way for the brokers to get people more interested in buying houses rather than the conventional way. The seal bid creates a buzz on a property and in return more people become interested in buying it.

Auctions like this were popular in the boom years and in recent years have  become a way for people to sell their property quickly. “In contrast to today’s sealed-bid auctions, those of the boom years typically were used to help organize a pre-existing bidding war and often didn’t have a minimum bid or a contract.” When doing a sealed bid auction today the rules are much different.

Sealed bid auctions require potential buyers to submit their bids by a certain time. They must submit them in writing to the seller. Then seller will choose which bid they prefer the most. In some cases all the bidders had to pay a 10% deposit, all the bidders who did not win got that deposit back.

This kind of process when selling and buying a house is pretty interesting. In some cases it could go badly for the buyer. If they were moving for work ect. and trying to get rid of their property quickly, and decided to use this sealed bid auction approach, they could potentially not get as much for their property as they had hoped.  On the other hand if the property is in a place like New York City and there are a few potential buyers, a sealed bid auction might be good because then the buyers might bid more for a need for that property. “Sellers who want to wring every last cent of their home’s value from the purchase may prefer the traditional sale process, which allows them to play bidders off each other to increase the price.” In other cases the sealed bid auction might be the best choice for them.


Selling with sealed bids

10 Replies to “Sealed Bids and Realtors”

  1. That is interesting, I did not know that kind of method of home-buying existed. I assume that this type of sealed-bidding for homes is heavily modified compared to that of sealed-bidding for inheritance. I already see that there is minimum bids and deposits which sounds reasonable.

    I am curious how the “fair-share”aspect of this works. For anyone who does not win a bid at all, there must be some kind of fair-share compensation according to the method of sealed-bids. But, this doesn’t make a lot of sense to me because people would intentionally place low bets to lose and obtain free money.

    The way I could imagine this working, is that there are multiple house to bid on, and that there would be some kind of entry bidding fee by the host of the sealed bid auction. That fee would be the equivalent of the inheritance example discussed in class.

  2. This is interesting. I think that this could go either way to help or hurt the person selling the house. It would definitely be a good option to use if your house was on the market for awhile and wasn’t selling, but you are right. The seller could end up getting a terrible bid. Once all the bids are in are they able to decide that this is not the process they would like to use if they were not going to receive enough money? or do they need to pick a “winner”?
    This could work out well in the buyers favor if bids are low, and it would mean that they could bid what they thought the house was worth, therefore, they would feel they were getting a good and fair deal if they were to win.
    I was skeptical about the deposit that gets put down for this process, but as a little “insurance” it makes sense, as long as those who do not win get their deposits back.
    I do not think I would personally use this method, but it is interesting that it is an option. It could work out well for some people.
    Although with regular listings, there is still the option to up your offer if someone else is “competing” to buy the house.

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