Highest and Best

Real Estate Investor · Milwaukee, WI · Member since 2008 · 1k+ posts · 671 votes

Can we all make a pact that we will submit our highest and best when we deal with REOs? I am tired to loosing deals, bidding against myself, and the bank playing us against each other.

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J ScottPro Member

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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

15y

Originally posted by Mark Yuschak:

Will, you often preach this, but the reality is that nearly all investors do not have those "connections" you seem to have.

I imagine it's possible for anyone to build these relationships, but the bigger issue I see is that in most places I'm familiar with, REO Listing Agents are forbidden by banks from giving out pocket listings these days.

In my area, I know of a couple listing agents/brokers who basically lost their REO business by doing this, and the rest aren't going to risk their livelihood helping investors make more money.

I do know many listing agents who are happy to give me info about an upcoming listing (address, price, lockbox code), but even if I make an offer prior to it hitting the MLS, there is no way they'll submit the offer until the day it's publicly marketed.

The other thing to remember is that many of the best deals are those that are purchased after a price drop or on a property that has been sitting on the MLS for a long time (seller is more desperate to get rid of it)...so offering full-price on the initial BPO isn't going to result in a lot of great deals these days (at least not in my area).

That said, for any investors that can find agents willing and able to do pocket listings, they should certainly pursue them...I would if I could...

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Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
15y
I can say that what Will has claimed is not only possible - but I have begun to make similar contact with asset managers for lenders in my area. And the inventory of REO that they have is very much local to their lending areas, so I concur with Will that to get any "wholesaled" to you, you'd have to want to buy in the areas where they lend.

The asset managers have a job to do - just prove that you can help make their job easier and you will gain the relationship needed - and they will be more confident of you when you perform. If you want to be "Mr. Bulky" with them, then you just might not get too far ...
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
Originally posted by Stan Jackson:
Quick story, online bidding platform has property for 98 days, no offers. My buyer ask me to make an offer. On Sunday, during the Super Bowl, I submit an offer. On Monday, an automatic email says the seller has received multiple offers, please have buyer submit H&B. My buyer stays at current offer. Property available for sale on the 105th day. What happened to the multiple offers? Not one was acceptable? Could be, but not likely.(IMO).

This is typical. Anytime they receive one offer, they send out an auto response stating they have multiple offers and ask for highest and best. Of course it is a lie. They have only your offer, but since it is below ask price, they ask for H&B and when they don't get it from you, they place back on market at same list price until they decide to reduce price. Only suckers not knowing how that game is played come back with a higher offer.
Originally posted by Financexaminer:
I also failed to mention I have a stop loss amount, maximum price topay, but can only go up with proof of the other offer. I also explain it to the listing agent
How do you get "proof"? They certainly can not provide you the other offer without written consent from the other party! Me too Jeffrey! Thank you Steve! Glad to hear you have made progress in your relationship building.
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Edgar B.
Residential Real Estate Broker · la mirada, CA · Member since 2011 · 66 posts · 12 votes
15y
I wanted to jump in, but dicieded to have a bottle of wine, i will put my thoughts & memory together. from what i've read all of you are right, minus a few.
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
Originally posted by willingtolearn:
I wanted to jump in, but dicieded to have a bottle of wine, i will put my thoughts & memory together. from what i've read all of you are right, minus a few.
I'm gald you dicieded to drink before typing! :mrgreen: I do it all the time! (Burp) :lol:
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Jeffrey K.
OP
Real Estate Investor · Milwaukee, WI · Member since 2008 · 1k+ posts · 671 votes
15y
willingtolearn, that made no sense.
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
Originally posted by Jeffrey K.:
willingtolearn, that made no sense.
Sure it did Jeffrey, thats how vino speaks! :cool:
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Jeffrey K.
OP
Real Estate Investor · Milwaukee, WI · Member since 2008 · 1k+ posts · 671 votes
15y
How many other people offer there highest and best to start with and stay when the bank calls? Any more stories to convince other BPers to do the same?
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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
Originally posted by Jeffrey K.:
How many other people offer there highest and best to start with and stay when the bank calls? Any more stories to convince other BPers to do the same?

I'm not sure what the benefit of making your first bid your highest and best offer?

I've had plenty of properties where my first bid was well below my H&B, and ultimately I was able to negotiate a price that was still lower than my H&B. Had I started with H&B in those situation, I would have been throwing away money...
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Jeffrey K.
OP
Real Estate Investor · Milwaukee, WI · Member since 2008 · 1k+ posts · 671 votes
15y
If it is priced to sell you should always submit your highest and best.
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Jake Kucheck
Residential Real Estate Agent · Costa Mesa, CA · Member since 2008 · 1k+ posts · 380 votes
15y
The way I look at it is this:

If it has been on the market for one day, it is an incredible price, you call the agent, and he says there are already 30 offers on it, 10 of which are cash, then submit your highest and best and move on.

If it has been on the market for 180+ days, you make a REASONABLE offer (not 12% of listing price) and they counter highest and best, tell them "you've got it" and wait for them to come crawling back with their tail between their legs. I've seen it happen a number of times.
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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
Originally posted by Jeffrey K.:
If it is priced to sell you should always submit your highest and best.

Sorry, I don't understand that reasoning...

Based on that, if I'd be willing to pay over list price, I should submit an offer over list price? Even if the property has been on the market a while and there are no other offers...

Just doesn't make sense to me from a business standpoint...
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Jeffrey K.
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Real Estate Investor · Milwaukee, WI · Member since 2008 · 1k+ posts · 671 votes
15y
It didnt to me either until I lost a property this way. It was priced at 61k. Needed 5k in work. ARV was 110-130k depending on finish. I was going to buy it as a rental. It had been sitting for 120 days. I offered 52k cash no inspection through the listing agent. The bank called for highest and best. I went up to 55k. The agent called me a few days later and told me I lost out to another buy (who I never knew about).

I learned that day that you offer what you can pay because in my investment area good deals are very hard to come by.
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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
Originally posted by Jeffrey K.:
I offered 52k cash no inspection through the listing agent. The bank called for highest and best. I went up to 55k. The agent called me a few days later and told me I lost out to another buy (who I never knew about).
I learned that day that you offer what you can pay because in my investment area good deals are very hard to come by.

I'm still confused. Was $55K your highest and best? If so, do you think you would have gotten the property for $55K had that been your original offer?

And you still didn't answer my question above...if you're willing to pay ABOVE list price for a property where there likely isn't any competition, do you make your first offer above list price? If not, it seems you're violating your own principal, and if so, that seems like really, really, really bad negotiating... :D

There's also the issue that banks like to counter-offer and rarely accept a first offer. If you offer your highest-and-best and get countered, you have no room to negotiate. My guess is that you'll lose more deals from this situation (where you basically refuse to negotiate your first offer) than you will by putting in your first offer below your highest and best.

I've spent much of my career negotiating deals professionally, and the idea of putting your best offer on the table at the outset is rarely (though occasionally) the best strategy.
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Jeffrey K.
OP
Real Estate Investor · Milwaukee, WI · Member since 2008 · 1k+ posts · 671 votes
15y
My point was taht 55k was not my highest and best and I could have paid the asking price and should have. When I submit an offer to a bank or any MLS deal I use my highest and best from the start and dont chance my offer when the call for highest and best.

Please restate the question if that didnt answer it.
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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
Originally posted by Jeffrey K.:
My point was taht 55k was not my highest and best and I could have paid the asking price and should have.

In this case, your problem wasn't that you didn't start with your highest and best, but that you didn't finish with your highest and best (i.e., when the bank asked for highest and best).

I 100% agree that you need to submit your highest and best when the bank calls for highest and best (it's too unlikely you'll get another chance), but it sounded like above you were saying that your very first offer should be your highest and best, which still doesn't make any sense to me...but in retrospect, maybe that's not what you were saying...

All I'm saying is that in my experience, about 40% of the time the bank doesn't call for highest and best, and in many of those cases, I get the deal for less than what I would have been willing to pay. The difference is pure profit in my pocket, and it would be crazy to give that up by offering highest and best to start.
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
I agree with Jason that, in this situation, your mistake was that you did not finish with your H&B.

My thoughts about all else recently stated is this: Each situation and circumstance should govern how you negotiate and submit offers. There is no right or wrong way each and every time. In many of my cases, when the BPO comes back at a price I am willing to pay, I make that full price offer that day and that number IS my H&B.

In the case where I may be making an offer on an MLS property listed for a day or more, each situation governs what I do. In some cases, I have offered my H&B on first offer, knowing anything less would have 0% chance of getting accepted simply because the property would be guaranteed to get a ton of action on it. In other cases, I have made a lower offer to start, and negotiated on up to H&B (if necessary) and never above that.

To sum it up, each situation is different and your stratgey needs to accomodate the situation.
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Bienes Raices
Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
14y
I have decided to make my initial offers a little lower than I normally would so that I have a "highest and best buffer", and can come up a little bit. I just did this and came up $3000 (plus offering to close in 2 weeks if they want). We'll see if it works. It is extremely annoying not to know whether there really is another offer, or if one is just getting played by the bank, but I guess that's just part of the game. I used to work in IT and I found that IT recruiters play similar types of games with candidates, trying to get them to lower their rates by a few $$$ when the client never asked for that.

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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
Originally posted by Bienes Raices:
It is extremely annoying not to know whether there really is another offer, or if one is just getting played by the bank, but I guess that's just part of the game. I used to work in IT and I found that IT recruiters play similar types of games with candidates, trying to get them to lower their rates by a few $$$ when the client never asked for that.

That's just negotiating, and it's part of every business transaction you'll ever do -- sometimes it's just not so obvious...
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Mark UpdegraffBusiness Member
Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 692 votes
14y
Originally posted by Will Barnard:
I avoid this problem by buying properties before they hit the MLS.
My highest and best is always the BPO approved price, assuming that number works and it is taken because it is full ask price and all-cash.
The highest and best only occurs with MLS properties and can also be avoided by bidding on non-financable properties removing all the retail buyers.

Will Barnard, How does one get connected to buy a property before it goes to MLS? This is a topic I've been curious about but have never had much time to follow up on.

Also, what are some examples of non-financable properties?

Thanks for your advise.
Sincerely,
Mark Updegraff
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Mark UpdegraffBusiness Member
Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 692 votes
14y
Highest and Best is always a tough situation. I stayed pat on my last one, and it was sucessful. It was priced right, and I knew it. I made a full price offer on the day it hit the MLS. I know for a fact that there were other offers (my agent had another client he needed to shove off). Luckily for me my offer was aggressive and I've done this a time or two before. I would not have stayed pat had I not made some phone calls prior. So, as mentioned previously, it's all about the networking :D

My little sister found a property in Tucson and I helped her negotiate it. They put an offer very shortly after it was price reduced (price reduced on friday, offer faxed on Saturday). Bank reduced from 110 to 55. Big jump. I suspected there was other action and advised her to up the ante. She did and won. Were there other offers? Probably, but maybe not. Regardless, they're happy :D

Highest and Best is a tough one! I think cash & no contingencies definitely help, but with a bank you probably still need to be the top dollar as well.... banks, who's running them anyway?!?
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
14y
Getting connected to those who can deliver deals pre-mls is not easy, particularly these days since the competition is so fierce and that those who can likely already have their top 3 investors they go to each time. However, to start, I always recommend that you speak with some of the top REO brokers in your area (when I say top, I mean those who regularly have 20+ reo listings each month), form a relationship with them, and show them how you will make THEM money! It also helps if they like you . . .
I also happen to be directly connected with two asset managers who can feed me pre-mls deals (and some that are on the MLS but pulled and given at lower price points). These contacts are needles in haystacks these days, but you asked so I have told.

Non-financable properties are those that do not have heating units, those without kictchens (or without kitchen appliances), and those that have some type of issue that poses a safety or health hazard (mold, foundation issue, illegal items, etc). Also, note that when I say non-financable, I am talking about end user financing (FHA or conventional) and not hard money, private money, etc as that can be obtained on any property that an investor is willing to lend on.

Hope that helps.

Will Barnard
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Bienes Raices
Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
14y
Originally posted by J Scott:
Originally posted by Bienes Raices:
It is extremely annoying not to know whether there really is another offer, or if one is just getting played by the bank, but I guess that's just part of the game. I used to work in IT and I found that IT recruiters play similar types of games with candidates, trying to get them to lower their rates by a few $$$ when the client never asked for that.

That's just negotiating, and it's part of every business transaction you'll ever do -- sometimes it's just not so obvious...

I know--but it's still annoying when someone (the bank) is bluffing such a large percentage of the time.
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Bienes Raices
Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
14y
Originally posted by Bienes Raices:
I have decided to make my initial offers a little lower than I normally would so that I have a "highest and best buffer", and can come up a little bit. I just did this and came up $3000 (plus offering to close in 2 weeks if they want). We'll see if it works. It is extremely annoying not to know whether there really is another offer, or if one is just getting played by the bank, but I guess that's just part of the game. I used to work in IT and I found that IT recruiters play similar types of games with candidates, trying to get them to lower their rates by a few $$$ when the client never asked for that.

Well, my experiment is over. They called for highest and best, I went up 3K, the agent called me and said that a bunch of offers had come in the day after mine, and asked me if I would go up more than 3K. I said no. I got an email from him several days later saying that the bank had accepted another offer.

I'm not sorry I did what I did--why should I go up more than I'm willing to pay, if I can't even see the other offer amounts (or know that they even exist?).

But the truth is, they aren't always bluffing. Sometimes there really is another offer that's better than yours.

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Danny Day
Developer · Houston, TX · Member since 2008 · 488 posts · 121 votes
14y
The past 5 highest and best offers we've stayed at have not been accepted.
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Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
14y
For a bit of humor on this. The last "highest and best" I experienced was one where I stayed put on my initial offer amount, and none of the offers were accepted at that stage. One week later, and after my offer had expired, I get a call from the listing agent saying that the bank now wants to accept my offer. Apparently, it was highest, but not good enough at first, but after seeing nothing else come along at a better number, they came back to me. But by that time I was already into another deal, and couldn't handle the other one too with other things I have going on. So I declined!

Now, there is even more to this one, because this bank was in second position when the FIRST foreclosed, so they ended up bidding at the foreclosure on the first and paying the first off - they outbid me and another buyer up to a certain dollar amount (and won with that amount being above the other bids, of course). The defaulted borrower gave them lots of difficulty after the foreclosure, and remained in the house over 8 months. When this REO finally did close, the offer from the investor who bought it as REO was the same as the highest bid from the other buyer at the sheriff sale. This bank would have probably lost less just staying away at the sheriff sale for the first mortgage.
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