One of the biggest mistakes a broker can make when marketing an investment property for sale is to fix the entire structured marketing process, including bidding deadlines and the number of bidding rounds, before the market has had a chance to speak. There are marketing proposals that stipulate a precise sequence: four weeks of marketing, one bidding deadline, a second round, a “best-and-final” round, contract negotiations, and a closing. This appears organised and professional and can reassure the seller that a carefully crafted plan is in place.
After more than four decades of selling investment properties in New York City, it is evident that this approach fundamentally misunderstands how successful competition works. A broker representing a seller absolutely needs a strategy, but this strategy must never become a rigid script. The goal is not to conduct a specific number of rounds, but to maximise the proceeds for the seller while optimising the likelihood that the transaction will actually close.
The Importance of the First Bidding Deadline
The first bidding deadline represents one of the most critical moments in a marketing campaign, and even the timing of this deadline requires judgment. Setting it too early can be as detrimental as setting it too late. A broker may wish to create urgency by announcing a short deadline. However, urgency without sufficient market presence can have severe negative consequences. If the property has not received adequate exposure, buyers have not had enough time to evaluate it, decision-makers have not been able to familiarise themselves, and the broker has not generated sufficient competitive pressure, the deadline may pass with disappointing participation.
Once this happens, the seller may find themselves in a position of having to chase the market, rather than the market chasing them. Any experienced buyer who subsequently enters the process will ask similar questions: “What happened with the bidding deadline? How many offers did you receive? What were the bids?” This situation must be avoided. Buyers understand the significance when a bidding deadline has passed and the property continues to be aggressively marketed. They will naturally assume that the response was weak, and this perception can significantly reduce their motivation to stretch themselves.
A deadline should therefore only be set once the right to do so has been earned. It is important to generate sufficient momentum, engagement, and enough credible prospective buyers so that the deadline strengthens, rather than diminishes, the negotiation leverage. The same principle applies after the deadline. What happens next should be determined by the field of bidders, not by something written down in a marketing proposal six weeks prior.
Competition and Fairness as Success Factors
Assume 20 offers of $40 million are received and the asking price is in the “low to mid $40 millions”. This breadth of competition represents an extraordinarily valuable asset for the seller. A second, third, a final, and perhaps even an “ultimate-final” round can be conducted, or all necessary steps taken to identify a subsequent “winner” from the field. Draft contracts could also be sent to multiple bidders, asking them to submit their contract comments as part of their offers.
Another crucially important point in conducting such a process is that every buyer must be convinced that they are being treated fairly and have a legitimate chance to acquire the property. No buyer wants to go through multiple bidding rounds. If given the choice, most buyers would prefer that the broker approached them directly, negotiated a transaction, and allowed them to avoid competition altogether. However, as brokers represent the seller, the goal is precisely the opposite: to create as much legitimate competition as possible.
The paradox is that competition can only arise if buyers are willing to participate. Experienced buyers will not continue to participate if they perceive the process as unfair, believe another bidder is favoured, the rules are constantly changed for certain participants, or the outcome is already predetermined. Buyers invest significant time, money, and intellectual capital in evaluating a property. If they believe they have no legitimate chance of winning, they will eventually withdraw. Therefore, maintaining fair conditions is an essential component of maximising value for the seller.
Fairness and transparency are not at odds with aggressive seller representation – they are prerequisites for it. The more confidence buyers have that they will be treated consistently and that a superior offer can win, the more likely they are to remain engaged, refine their offers, and continue to compete. Buyers’ trust in the integrity of the process allows the seller to maximise the benefit from the competition. At this point, price is only one component of the competition.
Deposit, financing contingencies, due diligence requirements, the closing deadline, contract comments, execution certainty, and the buyer’s closing balance become variables that can be used to improve the outcome for the seller and enable them to make a more informed decision about whom to work with. If there are 20 motivated bidders, the competitive environment itself becomes a lever. The broker’s task is to figure out how to intelligently use this lever.
- —Price and deposit
- —Financing contingencies and due diligence
- —Closing deadline and contract comments
- —Execution certainty and buyer history
Consider the opposite scenario: Assume the bidding deadline yields one offer of $50 million, while all other offers range between $44 million and $45 million.
