“What’s my cover?”

Often bond dealers will put out “bid lists” to customers or other banks of relatively illiquid bonds and ask for competitive bids for a handful of bonds. Invariably the buyer with the winning bid on a bond would ask “What’s my cover?”, that is “How much more did I pay than the next best bid.”

Importantly, there is no legal obligation to tell the them or especially to tell them the truth, and invariably the response would be “a tick” (1/32). The only time I’ve heard someone say someone tell the truth with bad news for the customer was “No cover - you were the only bid.”

This of course varies country to country. I'm unsure what country you or the GP are in, in mine the price is reported publicly in most states.

That sounds like a closed bid, where any psychological tactics against other biders are ineffective... maybe if someone incorrectly attempts to apply open biding strategies it makes sense to think of number that would barely outbid those people (as you did).

But to be honest I'm not sure what they were attempting to signal with 699, that's a sales strategy to make the price appear lower, surely you want it to appear the opposite. I guess some people copy strategies without understanding them.

It just sounds to me like some person said, "I'm not paying over 700K for this house." without thinking about how the bid would come across.

The other party can be multiple people who are internally having their own negotiation.

> sounds like a closed bid, where any psychological tactics against other biders are ineffective

Other bidders aren't making the decision to sell. The seller is. $701k might deter a seller countering a $700k bid with $735k (5% more).

If the ask was 645K and the seller got a bid of 700K would they counter higher? As a buyer I'd tell them to fuck off.

Listing price isn't asking price, it's just advertising to get your foot in the door.

If sellers got more money by listing their homes for $1, they'd be listing their homes for $1.

My realtor says when they have multiple offer and send out a request for "Best and Final Offers", hardly anyone ever changes their offer. They seem to be insulted about being asked for more after bending over backwards by going over ask, waiving all contingencies, etc.

Other bidders are making the decision whether to increase their bid.

I don't remember this was how putting an offer for a house worked. The seller is collecting a bunch of offers and picks the one they like the most. The offers can include escalation clause, but it's still more of a closed auction than the open auction.

Bought a house in SF last year. We lost two offers before securing this place. Both of the lost offers followed this pattern:

1. Set a bid due date 2. Ask three best offers for their "Best Final Offer" 3. We increased our offer (50k 1st case which was generous, 150k second case) 4. Lost, move on to the next showing. In the second case our BFO was 400k over asking, ultimate winner offered 600k over asking. Insanity.

When I sold my house in TX I also did the same: got two offers almost immediately after putting it on the market, so we went back to the buyers and asked for BFO. Both increased their offers.

Funny enough for our third winning offer we saw it the day before the Open House (which just started being allowed again) and put in our offer the day of the Open House. Won for around 50k over asking. I'm not 100% sure but from what I gathered an investor who wanted to rent it as an upstairs/downstairs duplex offered more but they wanted to sell to another family so they took our offer without asking for more money. I was very thankful for that - if they had come back asking for better offers we'd have walked.

The seller doesn't have to accept one of the offers, they can ask bidders to rebid or just let it sit on the market longer. If they got a lot of offers clustered around $700k, they might take the best (which might not be the largest, if there's a difference in contingencies), or they might try to get everyone to rebid, or maybe just the lower bidders to try to go back and forth. Of course, asking for a rebid usually means not accepting the firm bid, and there's a risk of putting off the potential buyers.

It's possible they were only approved up to a limited amount for a mortgage, and went to the top of that amount, or left some room for negotiation, and the top minus 5% came out to 699. Cash could also be a factor here.

It could also be that the buyer couldn't stomach paying 700 for the home, so they used the sales strategy on themselves to justify the price.

This also often worked on ebay for me, e.g. if you are willing to spend 60 $currency on an auction, make your highest bid 61.52 or something like that. The extra 1.5 dollars/euros/whatever doesn't really hurt but if there's many people who'd want to win the action for a similar price as you, it can be the distinguishing factor.

Yup. Same here for eBay and industrial equipment auctions - figure out my approximate maximum, consider the nearby round number, then add something almost trivial like the "1.52" in your example. While it obviously doesn't help if the bidding runs up to another level, I've found it helps a surprising number of times. And if you actually want to win the bidding, definitely do not skimp to below or at the round figure - that marginal extra will provide way more value than the cost (i.e., not losing & spending more time & funds getting the item elsewhere).

Now, I wonder how long it will take for auction systems to start suggesting this type of bid and ruining the strategy so we need to find another strategy...

> Now, I wonder how long it will take for auction systems to start suggesting this type of bid and ruining the strategy so we need to find another strategy...

To be honest, the immediate issue that is already there in this very moment is that more and more people no longer sell their stuff as regular auctions on ebay, but as completely overpriced fixed-priced offers. This is the main distinguishing factor for me between using ebay ten years ago and now. If everyone starts doing that, the best bidding strategies become useless.

It can sometimes be surprisingly difficult to sit down in isolation and decide what the ACTUAL maximum you're willing to pay for an eBay item is. That's part of the whole "auction" gimmick I guess: there can be an element of wanting to beat any competitors.

ebay is basically a second price auction, although not sealed-bid. I try to follow the strategy to bid my true value near the end of the auction, this is my only bid. I bid at the end to minimize the effect my bid has on other bidders. Then I just let the auto bidder to take over.

I had an extremely similar situation when we purchased our home last year. The home had an estimated valuation of 320k but because of the ridiculousness of the US housing market bids were going for upwards of more than 20k higher than the asking prices. We put in our bid for 341,100 - and we got it. I found out later that the next highest bid was exactly 340,100. That extra 1k in our offer made the difference for us.

For a 2k difference, I hope the sellers evaluated both offers for contingencies that would complicate the transaction. It would suck to have to carry a house for an extra month or two and lose the $2k difference because Offer 701k can’t get their financing together! :)

People seem to forget about that. As a seller, a smooth transaction is far more valuable to you than a .3% price difference (and troubles can get way more uncomfortable than just a delay; you don't want some three-letter agency come knocking at your door asking questions about your buyer or where their money came from). Just to be clear, if you're not going for the best offer for discriminatory reasons that's definitely not ok (morally and might also get you into legal trouble), but AML or financing concerns are very valid reasons.

When we sold our house ~6 months ago we had about 7 offers and we took a solid, but middle of the pack offer in terms of price. Their offer also had strong pre-approval and financial info and they were the fastest to respond when the house went on the market. This showed us they wanted our house in particular more than the other bidders, especially considering the pre-approval for their loan and their other financial details. They were still stretching a bit to buy the house, but they came through and closed in like 3.5 weeks on a jumbo loan. Did we leave a few dollars on the table? Probably. Were we happy with the outcome, yep :)

I used to negotiate really hard. Barely left a drop for the other side.

It's a losing strategy.

I found I was much better off if I could give the other side real wins.

Especially in repeated games.

Game theory says you are leaving something on the table when you do that. But we are all humans first and optimized game theory machines second :)

Game theory for repeated games actually says you want to seem like a fair or generous player so that the other side doesn't defect and keeps wanting to play the game with you.

Single-round best strategy is squeeze and defect.

Game theory is great for zero-sum situations. Most negotiations are not.

What do you think negotiation is?

Good negotiators find trades that are valuable for both sides of the table. That's how you negotiate well.

> ...you don't want some three-letter agency come knocking at your door asking questions about your buyer or where their money came from...

That does not sound realistic for a normal-homeowner U.S. real estate sale. There are generally two Realtors and a title company as professional intermediates in the transaction. The seller may only know the buyer's name if the seller spends time reading routine paperwork - which those intermediates create and handle. Why would the XYZ agents visit the seller - when the buyer's Realtor, buyer's bank, and title company have so much more information, insight, and experience on the matter?

I know a guy who backed out of a real estate deal that he'd really wanted for that reason (AML). He's a banker himself, maybe that's why he was a bit more on the edge wrt AML, but his attorney also recommended it. That was a normal (ok, nice) one-family home in an affluent suburban area, not a rock star villa in Beverley Hills.

He backed out as seller (the grandparent post's concern - "knocking on your door", post-closing), or buyer?

I can see it as buyer (you want a house, not a title insurance claim). But as seller...even having your own atty. involved seems pretty odd. It's the job of the Realtors, title company, and bank(s) to judge the buyer's money, and call it good or bad.

(Or did someone offer to buy your acquaintance's house, with no intermediaries, for a briefcase full of cash? That raises enough red flags that you could host a birthday party for Karl Marx.)

Apparently it’s normal to have an attorney when buying or selling real estate in New York. I found this pretty surprising, because in California the contract is a generic form where you literally just check the applicable boxes and write in numbers.

Another tidbit: in NYC, most people use an agent when they rent an apartment. They charge one month’s rent.

I’ve always had an attorney represent me for RE transactions, not in NY, though. It’s usually a couple hundred bucks and each time easily saved us money.

Absolutely, you can bid lower if you add "cash in your account tomorrow". People are risk adverse, they want a solid offer that closes immediately.

This is how I bought my house back when the market was bad. We had cash and financing and didn't have another house to sell. In my case at the time, it was a pretty decent discount.

It also helped the owner had been moved by his job, and was looking to get out of the house ASAP.

Indeed; my offer also came with no contingencies...

Financing? In 2022?

I think they're suggesting the seller should understand the risks of their undertaking. If they didn't do their due diligence it could end up being the case that the offer they take was the "worse" offer because the person making it couldn't back it.

That there are other considerations for a seller aren't really relevant when the post is about bidding just higher than a round number to win it. Just as explaining how you won the bid at 2k lower by having a cash offer and writing a nice letter and being accommodating with their move out times is irrelevant to the round number argument. The story of bidding 701k is clearly in the realm of "all else being equal", nudging the price up a relatively insignificant amount can have a significant effect.

Right, but they are replying to the BUYER. The seller probably doesn't even know what HN is.

It's just a weird thing to say to the BUYER, "ah, but did the SELLER look into your finances before they took your bid"

A lot of what’s said on HN, in good faith, would sound totally weird in person.

The reason someone would accept a slightly lower bid for a house is the funding source is easier/more likely to go though. Nothing to do with the roundness of the bid.

That's assuming the $699k bid isn't entirely fictitious, which it probably is. Both agents have an incentive to make the buyer feel good about the transaction and not like they overpaid when they did.

haha, I wonder who's analyzed that game formally. feels a bit like the 2/3 game with flipped signs (https://en.wikipedia.org/wiki/Guess_2/3_of_the_average). for real numbers, the unique Nash equilibrium is 0, for finite precision numbers (which we're effectively dealing with in reality), the set of Nash equilibria is a bit more interesting.

but of course, Nash equilibria don't always line up well with human behaviour. for the 2/3 game there's empirical work showing that the best strategy against inexperienced players is betting somewhere around 20 iirc. would be interesting if there are papers that would give a similar rule of thumb how much of a "premium" you should offer over the nearest sensible round number

Or you could use an escalation clause. Go above the highest bid by a certain dollar amount and cap the limit.

Right, on Ebay I’ve always bid slightly above a round number for that reason.

All those episodes of Price is Right finally paid off.

Why didn't you bid 702?

True, but bidding is also the opposite from offering for sale, so it makes sense to go up instead of down like you see with the prices in shops.

hence,

> I'm so happy they took this unrounding advice in the other direction :-)

they went up, the others went down.

Ah, I read it as going against the advice!