High Offer, Countered With “Highest and Best”

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High Offer, Countered With “Highest and Best”

Mark Abbate
Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes

Hello All,

I have been in the market for about 2 months looking at places, putting offers in an constantly getting outbid. I am a very patient person so this doesn’t bother me in the slightest. I recently found a place that was listed at 465k, I loved the area, it had all the amenities I’m looking for and then some. So, I put in an offer for 560k (pretty ridiculous I know, but I don’t think it will appraise that high) and now I’m being countered for a highest and best offer.

For reference an identical unit closed a week or so ago for 490k but was listed that it needs a little work. I also have an appraisal contingency in place for 10k over appraisal value. By no means am I an appraisal expert or anywhere close to one but I’d be hard pressed to see this place get appraised for over 540k if that.

I’ve decided to stand by my 560k offer cause quite frankly I think it’s a little absurd to go higher but I do love the property. Do you think the highest and best is just to squeeze a little more out of me even though that was essentially my highest and best?

Thank you!

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Will Fraser
Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
5y

Hey @Mark Abbate, I used to ALWAYS think that Highest and Best was a play to squeeze more out of the buyers until our local market started to heat up.  At times that IS the agent or seller's intention, but one of the other affects of a call for Best and Highest offers is that when multiple offers are received (especially in the first few days on market) the listing agent will look at the number of showings scheduled on the home or the number of agents who have reached out to let them know that "an offer is coming, just need some time" and will call for Best and Highest in order to give everyone a shot at offering.

In reality B&H allows ALL offeror to go into the offer eyes wide open, aware that it is a competitive situation (duh, right?  But seriously, it makes a huge difference with some buyers).  It DOESN'T mean there is anything wrong (or right) with your offer.  Do your diligence, know your numbers, and let those numbers tell the story.

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  • Will Fraser
    Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
    5y

    Hey @Mark Abbate, I used to ALWAYS think that Highest and Best was a play to squeeze more out of the buyers until our local market started to heat up.  At times that IS the agent or seller's intention, but one of the other affects of a call for Best and Highest offers is that when multiple offers are received (especially in the first few days on market) the listing agent will look at the number of showings scheduled on the home or the number of agents who have reached out to let them know that "an offer is coming, just need some time" and will call for Best and Highest in order to give everyone a shot at offering.

    In reality B&H allows ALL offeror to go into the offer eyes wide open, aware that it is a competitive situation (duh, right?  But seriously, it makes a huge difference with some buyers).  It DOESN'T mean there is anything wrong (or right) with your offer.  Do your diligence, know your numbers, and let those numbers tell the story.

    11Reply
  • Andrew FreedBusiness Member
    Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    @Mark Abbate, @Will Fraser - Will had some solid advice. I agree, I would not get caught up in a bidding war. Run your numbers and offer what makes sense. If you truly like the asset and increasing the price by $10-20k would still make this property work from a numbers perspective then go for it. Otherwise, I would recommend sticking with your originally bid. 

    On a side note, did you include a personalized letter with your offer? I would recommend following up your bid with a personalized letter to humanize your offer in either case, which I have seen be very effective. 

    [email protected]781-964-3200Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money
    4Reply
  • Braden C.
    Real Estate Investor · FL · Member since 2011 · 586 posts · 360 votes
    5y

    @Mark Abbate You should start going directly to sellers and avoid MLS deals. You said it was an identical unit that sold for $490k so I am assuming this is a condo or townhouse? Why not spend a couple thousand dollars on a direct mail campaign and include an offer price in your letter? I am willing to bet you could not only find an off-market deal, but you could probably get one for less than the $490k once you point out that the seller won't have to pay commissions to agents.

    7Reply
  • Will Fraser
    Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
    5y
    Originally posted by @Braden C.:

    @Mark Abbate You should start going directly to sellers and avoid MLS deals. You said it was an identical unit that sold for $490k so I am assuming this is a condo or townhouse? Why not spend a couple thousand dollars on a direct mail campaign and include an offer price in your letter? I am willing to bet you could not only find an off-market deal, but you could probably get one for less than the $490k once you point out that the seller won't have to pay commissions to agents.

    But where would one find a way to do such an awesome thing?!? 🧐 

    6Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    5y

    Of course its about getting the highest offer.  That's the agents job. It's also giving the courtesy to the buyers and the agents to let them know basically up front, theres multiple offers, likely strong ones, so if you want a chance at this you better show me the money. 

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    8Reply
  • Mark Abbate
    OP
    Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes
    5y

    @Will Fraser

    I appreciate this Will, that helps clear the waters. I am rerunning numbers and trying to take emotions out of it. Thank you for your feedback!

    0Reply
  • Mark Abbate
    OP
    Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes
    5y

    @Andrew Freed

    Thank you for the insight! There was a personal letter included and we decided to stick with the offer as the numbers didn’t make sense when going much higher.

    3Reply
  • Mark Abbate
    OP
    Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes
    5y

    @Braden C.

    I have heard of this strategy and will definitely do a lot more research on the topic! I appreciate it Braden.

    0Reply
  • Mark Abbate
    OP
    Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes
    5y

    @Russell Brazil

    Thank you Russell, I agree that at the end of the day it will generally always come down to the dollar amount! I work in sales as well and a mentor of mine told me that “pigs get fed and hogs get slaughtered”. In this situation, the seller would be getting a 170k return over 5 years on a 2 bedroom 2 1/2 bath condo. Trying to keep my sales/professional/business cap on, to me that seems like a great deal for the seller.

    0Reply
  • Erik W.
    Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
    5y

    I'm not sure what the plan is for making money in a market where bidding wars are pushing prices up well beyond list price.  Sounds to me like bubble city.  I would be going after assets that are holding steady, appreciating mildly or falling in value for the wrong reason (i.e. irrational fears).  To me, this sounds like speculation and mirrors what was happening right before the "pop" in 2008-2009.  I could be wrong.  Crystal ball isn't working today.

    Why do you want this property badly enough to pay over list price for it?

    4Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y
    Originally posted by @Mark Abbate:

    @Andrew Freed

    Thank you for the insight! There was a personal letter included and we decided to stick with the offer as the numbers didn’t make sense when going much higher.

    Smart decision to hold firms because odds are good you were the highest offer to begin with. I was going to suggest lowering your offer to $550K and see what they say. If everyone did that we could teach realtors and sellers a lesson for playing these games.

    9Reply
  • Mark Abbate
    OP
    Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes
    5y
    Originally posted by @Erik W.:

    I'm not sure what the plan is for making money in a market where bidding wars are pushing prices up well beyond list price.  Sounds to me like bubble city.  I would be going after assets that are holding steady, appreciating mildly or falling in value for the wrong reason (i.e. irrational fears).  To me, this sounds like speculation and mirrors what was happening right before the "pop" in 2008-2009.  I could be wrong.  Crystal ball isn't working today.

    Why do you want this property badly enough to pay over list price for it?

     For me this is a long term investment and it has some parks and other nice developments in the works in the surrounding area. So I’m holding and using as a primary residence in a desirable area until I move out and use a rental.

    0Reply
  • Mark Abbate
    OP
    Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes
    5y
    Originally posted by @Joe Splitrock:
    Originally posted by @Mark Abbate:

    @Andrew Freed

    Thank you for the insight! There was a personal letter included and we decided to stick with the offer as the numbers didn’t make sense when going much higher.

    Smart decision to hold firms because odds are good you were the highest offer to begin with. I was going to suggest lowering your offer to $550K and see what they say. If everyone did that we could teach realtors and sellers a lesson for playing these games.


    Man that is a great idea, I should’ve done that! Missed opportunity to stick it to em...

    1Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    5y
    Originally posted by @Joe Splitrock:
    Originally posted by @Mark Abbate:

    @Andrew Freed

    I was going to suggest lowering your offer to $550K and see what they say. If everyone did that we could teach realtors and sellers a lesson for playing these games.

     That's what Mr. Wonderful on Shark Tank would do.

    9Reply
  • Dennis Wayne
    Member since 2020 · 339 posts · 356 votes
    5y

    No surprise here , it’s a game realtors and sellers play to screw you without accountability whatsoever ! There may very well be no other buffets at all and nobody has to prove it ! Realtors are like used car salesman. Their goal isn’t to find you a great home for a great price contrary to popular belief ! Their goal is actually to get you to pay the highest amount possible before you throw your hands up in the air and say $&@ it ! Don’t play their game . Run your numbers and buy solely based on that . If the highest and best is higher then walk don’t fall for their dirty tricks

    4Reply
  • Mark Abbate
    OP
    Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes
    5y

    @Mike Dymski

    The more I think about it, the more I wish I’d done this!

    1Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    5y

    @Mark Abbate You should phrase it like Mr. Wonderful would, too... “Because you didn’t take my original offer, which was a sweetheart of a deal at $95k/20% OVER your asking price, I’m rescinding that offer and making you this bloodsucking offer of only $550k.” Holy smokes this market has gotten completely irrational very quickly. There’s all kinds of shenanigans on both sides of the table these days. Speaking of which, sending an offer that high over ask with the hope that it won’t appraise and you can retrade based on appraisal isn’t really a good faith move either. A good listing agent will sniff that out and go with a safer offer even if it’s lower. I’d recommend making a more realistic offer to begin with, including all the stops: appraisal gap coverage, escalating clause (if they’re being accepted), heart strings letter (not being looked at much in my market because sellers are getting so many offers, but doesn’t hurt), waive whatever contingencies you can/feel comfortable with, use cash or if you don’t have cash use a “same as cash” program that allows you to make a cash offer then finance immediately after closing, make the inspection “for informational/health and safety purposes only”, etc. Most listing agents I know are throwing out the way-over offers that they know have a low likelihood of sticking. They’ll recommend the buyer take a cleaner offer even if the amount is lower. $95k over with only $10k in appraisal gap coverage just tells the listing agent you’re planning on renegotiating based on appraisal.

    7Reply
  • Debbie Thomas
    Realtor · Austin, TX · Member since 2015 · 12 posts · 4 votes
    5y

    I just had a webinar with a lender today about offers over the appraised value - Many in Austin are going for $100K over asking.  He said that as long as you're able to bring the extra money down, it won't change the loan. Then he showed a graph of how long it takes to break even.  In our example is was 3 years with a conservative 3% annual increase (But Austin has been 10-12% per year.)  So the question is...How long do you plan to hold the property?  I agree with @Steve K. that the 10K appraisal gap makes the higher offer not as strong if the realtor in fact knows that the appraisal is much lower.  Are you working with a realtor? Maybe they can check to see if there are any pending properties in the area and what those offers were.  The lender from the webinar mentioned trying to delay the closing if there are higher comp properties that are pending so they can close and be used in the appraisal. Not sure any of this is useful...it's just what we discussed today. good luck!

    0Reply
  • Jaquetta T Ragland
    Real Estate Agent · Winston Salem, NC · Member since 2014 · 486 posts · 303 votes
    5y

    @Mark Abbate i do believe the goal of “highest and best” is to get as much as possible but almost $100k over asking price...how much more do they want? I think if that’s your highest and best, you should definitely stick with it.

    3Reply
  • Charlie MacPherson
    China, ME · Member since 2014 · 3k+ posts · 4k+ votes
    5y

    The amount of ignorance and arrogance on this thread is just breathtaking.

    The seller's agent is a fiduciary to the seller.  His legal obligation is to get the most possible money with the best possible terms for the seller - and that's EXACTLY what you would want your agent to do for you when you sell your property.

    Highest & best is not a game.  It is not a trick.  It is not sleazy.  It is literally an agent doing the job that he is required to do by law.

    When an agent represents a buyer, a highest & best request gives the buyer a chance to improve their offer, which is especially helpful if they're below asking.  Of course there have been times when I have advised the buyer not to increase their offer, but a below-asking offer in a hot market generally means the offer will fail.  And when it fails, the buyer's agent is the jerk for not advising the buyer to raise their offer, right?

    5Reply
  • Robert Campbell
    Rental Property Investor · Greenville, SC · Member since 2019 · 30 posts · 13 votes
    5y

    @Mark Abbate It’s absolutely lazy negotiation. Typical agent stuff. They don’t want to spend time hearing anyone’s real motivation to bring together a deal that makes everyone happy. They just want to siphon their money off of the deal and get outta there...

    2Reply
  • Dennis Wayne
    Member since 2020 · 339 posts · 356 votes
    5y

    @Robert Campbell

    Exactly ! and they say wholesalers are scummy predators operating for personal nefarious reasons but have no problem artificially inflating the price behind the curtain . I don’t play their stupid games I’ll let the greater fool do that

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    5y
    Originally posted by @Will Fraser:
    Originally posted by @Braden C.:

    @Mark Abbate You should start going directly to sellers and avoid MLS deals. You said it was an identical unit that sold for $490k so I am assuming this is a condo or townhouse? Why not spend a couple thousand dollars on a direct mail campaign and include an offer price in your letter? I am willing to bet you could not only find an off-market deal, but you could probably get one for less than the $490k once you point out that the seller won't have to pay commissions to agents.

    But where would one find a way to do such an awesome thing?!? 🧐 

     If only there was a way.......

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    5y

    Lots of baseless speculation here. At the end of the day you may or may not actually have the highest bid right now. Nothing anybody in this random thread says changes that.

    Make the highest offer you are comfortable with and go from there.

    0Reply
  • Robert Campbell
    Rental Property Investor · Greenville, SC · Member since 2019 · 30 posts · 13 votes
    5y

    @James Wise of that’s all there is to it, then what is the service of the agent? Can we all just admit that we don’t need real estate agents anymore? What do they do? Regurgitate the contract? That’s admin stuff. I would be more than happy to pay agents $12/hr to forward emails and fill out the contract.

    1Reply
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