By Robin Liu, June 2015 – Founder of DownsizeSale.com.
There are two sale mechanisms that dominate real estate sales: Negotiated Sales
Mechanism and Auction Sales Mechanism.
For auction sales mechanism, we all know that online bidding has been implemented into this sales mechanism. What is more, online bidding system also makes the real estate auction method grow substantially in recent years, emerging as an alternative real estate sales method.
For a long time, I have been wondering why online price negotiation has not been applied into negotiated sales mechanism. Offer Counter-offer formula was developed in 19th century, and is still going offline. We know that it is lots easier to apply online bidding into auction sales method, but it is more complicated for negotiated sale method, simply because online system has to properly handle the negotiation process between one seller and multiple buyers.
In fact, if the offer counter-offer formula is modified properly, the process of price negotiation between one seller and multiple buyers can also be done completely online as well.
Robin Liu, the founder of Bidwin.org (link: http://www.bidwin.org) which is the first online real estate auction marketplace (link: http://www.bidwin.org) in Canada,
recently innovated an online price negotiation method which he named BidNego Sales Formula, and he is now working to implement it into Bidwin Real Estate Auction Platform (link: http://www.bidwin.org/community/page/Why-Real-Estate-
Auction-Platform ) as an extra option of sales method. He has also filed a patent application and now the application is patent pending.
Here is the formula of BidNego Sales Method:
- Online sale starts with an asking price at high end, and an minimum starting price at low end.
- Buyer’s offer price can only go up from the starting price.
- The seller’s counter price can only go down from the asking price.
- Online process ends with success when seller’s counter price meets buyer’s offer price.
- Sale process has no end deadline. Sale process keeps going till the property is sold or the listing is cancelled, withdrawn or expirs.
See the graph blow:
- It is a transparent process: every offer price and counter price are visible to both seller and all buyers.
- Every offer price is binding for 48 hours or outbid by a higher offer price, whichever comes first.
- At any time seller can accept current highest offer price and ends the online process as long as the current highest offer price does not pass the 48 hour binding period.
- At any time the buyer can accept the seller’s current counter price and ends the online process as long as the listing is active ( not expires, cancelled or withdrawn)
- Every new offer price must be higher than the current highest offer price by a pre-set increment, even when the current highest offer price has passed the 48 hour binding period .
- Seller’s counter price is continuously binding till the listing is cancelled, withdrawn or expired.
- All buyers’ offer prices and seller’s counter prices are based on the same set of transaction terms. No contingencies or conditions precedent (No cooling period) are allowed.
- Seller can withdraw and relist the listing after the current counter price stands for a certain period(for example 48 hours). This can be used by the seller to avoid current counter price being accepted by buyer.
What is the differences?
- The BidNego Sales Method is a modified Negotiated Sales Mechanism.
- If there is only one buyer in the whole sale process, the process is in fact exactly the same as the negotiated sale mechanism, that is why the auction sales method will fail in this case, but BidNego Sales Method will not.
- When there are more than one buyer participating in the sale process, the process is in fact more like a modified auction process mixed with negotiations with seller.
- The best embodiment of this sales method is by online process. In an online sale process, buyers and seller can submit offer price and counter price any time anywhere. The client computer devices can capture data from server computer and draw a graph like below: