High Offer, Countered With “Highest and Best”
Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes
High Offer, Countered With “Highest and Best”
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Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
5yHey @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.
87 Replies
- Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes5y
Escalations should always have a cap. For example: "Purchase Price shall be $X amount more than any other bona fide offer submitted to Seller on or before X date, not to exceed $X." Be sure to have your agent tell the listing agent to produce the next highest offer to make sure the Seller isn't pulling a fast one.
The only problem is, a lot times they'll just counter at the "not to exceed" amount even if they don't have another offer, because you've tipped your hand that you're willing to pay that amount. Hence a lot of agents not using or accepting escalation clauses anymore and just going with "highest and best" to attempt to streamline the process (escalations were popular in my market a few years ago but it's common now for listing agents to discourage them and simply ask for highest and best). The purpose is to cut to the chase and avoid a situation where the seller has to compare 9 offers all with escalation clauses, or the sale price to get driven up to an unreasonable amount and then that deal ends up falling through or being renegotiated later anyway because the buyer has so many ways out if they feel like they've overpaid.
The keyword in highest and best is "best" IMO. I had two offers accepted last week: one was $100k less than several other offers on a $1M deal, the other was $50k less than other offers on a $410k deal. We won because we waived all the contingencies we could, submitted complete offers perfectly exactly as the listing agents asked for in their "Contract Preparation Form" (listing agents are getting picky about how they want offers prepared these days), had the lender call the listing agent to vouch for my client's ability to close, used a local lender with a good reputation for being able to close on time, etc., etc., etc. and I verbally made it clear to the listing agent that we wouldn't nickle and dime them on inspection items or jerk them around at all and that we would make it a clean, good faith transaction. A lot of deals are falling through these days as buyer's are getting cold feet and other buyers are spamming over-ask offers that aren't real, so these things go a long way. It's a people business too so if you're agent has a good reputation that helps immensely, and if they're unknown or have a bad reputation, that obviously doesn't help.
People can say agents aren't needed or are playing games/used car salesman, whatever they want but that's pure ignorance IMO. Communication and reputation are key to getting deals accepted. 9 out of 10 deals use agents according to title company records, and FSBO/off market deals without agents involved are actually where the majority of litigation occurs, because they're often a complete mess, so I think anyone saying agents aren't needed is living in Lala land personally.
- Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes5y
Originally posted by @Jay Hinrichs:
Originally posted by @Mark Abbate:
@Jay Hinrichs
Ok that is definitely good to know. I did some research on it but since I haven’t used one before I’m not well versed. So thank you for that!
Unless something in the contract has a non refundable deposit just to bid.. which even in this market you dont really see
We're actually seeing that here quite a bit. Buyers are letting a portion of earnest money go hard upon acceptance as a way of letting the seller know they are serious and won't jerk them around. It's a good way to make your offer stand out IMO. But of course you have to really want the property. It's usually not all the earnest money, but a portion like maybe up to $2,500.
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve K.:
Originally posted by @Jay Hinrichs:
Originally posted by @Mark Abbate:
@Jay Hinrichs
Ok that is definitely good to know. I did some research on it but since I haven’t used one before I’m not well versed. So thank you for that!
Unless something in the contract has a non refundable deposit just to bid.. which even in this market you dont really see
We're actually seeing that here quite a bit. Buyers are letting a portion of earnest money go hard upon acceptance as a way of letting the seller know they are serious and won't jerk them around. It's a good way to make your offer stand out IMO. But of course you have to really want the property. It's usually not all the earnest money, but a portion like maybe up to $2,500.
On my new construction we do 10k non refundable upon ratification of contract and they have 3 days to bring it in once its in its non refundable.. if they never bring it in.. then the deal dies. although I ahve not had that happen
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes5y
Originally posted by @Jay Hinrichs:
Originally posted by @Mark Abbate:
@Jay Hinrichs
I really, genuinely hope that you aren’t being serious......
How can the simple notion of writing a letter to add more information about yourself and why you want to buy a certain property make someone racist? Mind boggling.
I am totally serious and i just took my CA brokers CE and I think it was mentioned there as well.
Keep in mind the political environment we are in.. you know the systemic racism.. ??? be it white black yellow brown
Never know what kind of bias a seller will have.. that's the point our regulators who are out to protect the public are thinking..
It seems like if you were trying to be racist that having the buyers name on the offer is just as bad. Some names have ethnic identity and you can always just look people up on the internet. I don't agree with discrimination, but I think people could do it regardless.
I have never sent a letter and as a seller I could care less who buys my place. I only see one color, green.
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve K.:
Escalations should always have a cap. For example: "Purchase Price shall be $X amount more than any other bona fide offer submitted to Seller on or before X date, not to exceed $X." Be sure to have your agent tell the listing agent to produce the next highest offer to make sure the Seller isn't pulling a fast one.
The only problem is, a lot times they'll just counter at the "not to exceed" amount even if they don't have another offer, because you've tipped your hand that you're willing to pay that amount. Hence a lot of agents not using or accepting escalation clauses anymore and just going with "highest and best" to attempt to streamline the process (escalations were popular in my market a few years ago but it's common now for listing agents to discourage them and simply ask for highest and best). The purpose is to cut to the chase and avoid a situation where the seller has to compare 9 offers all with escalation clauses, or the sale price to get driven up to an unreasonable amount and then that deal ends up falling through or being renegotiated later anyway because the buyer has so many ways out if they feel like they've overpaid.
The keyword in highest and best is "best" IMO. I had two offers accepted last week: one was $100k less than several other offers on a $1M deal, the other was $50k less than other offers on a $410k deal. We won because we waived all the contingencies we could, submitted complete offers perfectly exactly as the listing agents asked for in their "Contract Preparation Form" (listing agents are getting picky about how they want offers prepared these days), had the lender call the listing agent to vouch for my client's ability to close, used a local lender with a good reputation for being able to close on time, etc., etc., etc. and I verbally made it clear to the listing agent that we wouldn't nickle and dime them on inspection items or jerk them around at all and that we would make it a clean, good faith transaction. A lot of deals are falling through these days as buyer's are getting cold feet and other buyers are spamming over-ask offers that aren't real, so these things go a long way. It's a people business too so if you're agent has a good reputation that helps immensely, and if they're unknown or have a bad reputation, that obviously doesn't help.
People can say agents aren't needed or are playing games/used car salesman, whatever they want but that's pure ignorance IMO. Communication and reputation are key to getting deals accepted. 9 out of 10 deals use agents according to title company records, and FSBO/off market deals without agents involved are actually where the majority of litigation occurs, because they're often a complete mess, so I think anyone saying agents aren't needed is living in Lala land personally.
Most that say agents are not needed are knowledgeable investors and they probably dont need an agent.. but the civilian buyers out there who may do this a few times in a life time have no clue.. they dont know what they dont know. And no doubt agents run the gambit from rock star to dud..
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Joe Splitrock:
Originally posted by @Jay Hinrichs:
Originally posted by @Mark Abbate:
@Jay Hinrichs
I really, genuinely hope that you aren’t being serious......
How can the simple notion of writing a letter to add more information about yourself and why you want to buy a certain property make someone racist? Mind boggling.
I am totally serious and i just took my CA brokers CE and I think it was mentioned there as well.
Keep in mind the political environment we are in.. you know the systemic racism.. ??? be it white black yellow brown
Never know what kind of bias a seller will have.. that's the point our regulators who are out to protect the public are thinking..
It seems like if you were trying to be racist that having the buyers name on the offer is just as bad. Some names have ethnic identity and you can always just look people up on the internet. I don't agree with discrimination, but I think people could do it regardless.
I have never sent a letter and as a seller I could care less who buys my place. I only see one color, green.
I saw these letters pop up OH maybe 20 maybe 25 years ago.. And it does work on the owner occ arena.. where someone has lived in a house for years and its just not about the money.. its about how they will take care of their property the flowers don't want to upset the neighbors all sorts of those type of emotions. But your right In our area we have a very large Russian population that is very active in the real estate business so its pretty easy to spot them on contracts..
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Not sure why numbers have to work if your going to live in it.. the price is the price it comes down to if you can afford it and you like the location above all else.
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Not sure why numbers have to work if your going to live in it.. the price is the price it comes down to if you can afford it and you like the location above all else.
He labeled himself a "Rental property investor" and this is generally an investing forum.
Where did he say he is planning to do this just to be a homeowner, and not for profit as an investor?
I deduced that on my own given price point and type of property.. not a lot of investors by 475k townhouses to rent them out.
but maybe could be the case.. and I could for sure be wrong on that score..
- Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes5y
@Jay Hinrichs
This would be my first property purchase after living with my parents.
I would be using it as my primary residence for 3-5 years or so (could be more, could be less) in an area that I see upward potential in. Then down the road I would rent it out or sell it based on my circumstances at that time.
- 5yCharles A.Pro MemberRental Property Investor · Jacksonville, FL · Member since 2015 · 208 posts · 282 votes
@Mark Abbate
Do.Not.Do.It.
Been there,done that,have the T-shirt.
- Rental Property Investor · Whittier, CA · Member since 2019 · 22 posts · 19 votes5y
****UPDATE****
Seller ended up going with a slightly higher offer + they had a 20% down payment ready as well. I am somewhat relieved about this, even though it was a very nice location and had everything I was looking for.
Key Takeaways:
1) Run the numbers and stick to them. Take your emotions out of it. Always.
2) In certain situations consider an escalation clause.
3) Keep self educating.
4) Get back on the saddle and search for more properties.
Laughable (Sarcastic) Takeaways:
1) When countered with another "highest and best" scenario, take Mr. Wonderful's approach and now offer less since they are wasting my time....totally kidding, but maybe not.
2) If the buying agent writes a harmless letter about their client they might get sued because people are overly sensitive nowadays and think that everyone is out to get them.
- 5yErin ChurchPro MemberReal Estate Agent · North Augusta, SC · Member since 2017 · 254 posts · 233 votes
@Angelika Roerig
I know I’m late to this discussion, but this is exactly what I was going to suggest! This is one of the best stips a person can include in a bidding war to make sure they don’t miss out by a few thousand. I’d add that if they trigger the escalation clause, they must provide a copy of the offer
- Property Manager · San Antonio, TX · Member since 2016 · 61 posts · 31 votes5y
I'm a listing agent in a multiple offer situation, and had a buyer's agent gripe at me today because I didn't ask him to submit highest and best after their initial offer. I think sometimes it's a game, but sometimes it's just communicating the reality of the situation. As in investor, always, always, always know what YOUR best offer would be and just submit that up front and stick to it. :)
- Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes5y
Originally posted by @Dennis Wayne:
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
Respectfully or not so respectfully because you are insulting... you don't know what you are talking about. Like, not at all. You can't send a MCO without multiple offers. It is a department of real estate compliance issue and your broker will part with you for something like that. Every file goes through your transaction coordinator and brokers compliance manager at a minimum. I guess it could happen at a one man brokerage but they would be called out to the local board quickly. It doesn't take a rocket scientist to see the traffic on a house and know if there are multiple offers.
When representing buyers your goal is to get them in a home that meets their needs as quickly as possible regardless of price. If you do a good job you get paid, you get referrals, you get repeat business from them and their family. If you don't then you may or may not get paid one time. Agents make 2.5-3% so to suggest buyers agents really want to drag things out and make you overpay is stupid. You think agents want to drag things out, delay getting paid and drive a client crazy to make an extra $250.oo?
- 5yRyan KellyBusiness MemberReal Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
@Mark Abbate Just remember, the list price and “what a home is worth” are two completely different things. This list price is a number created by the seller and listing agent to start a conversation. It’s advertising. What it is worth is ALWAYS what a buyer is willing to pay for it. In slow markets, it could be below the list price, in hot markets it is likely above the list price. If a home lists at $250,000 and sells at $300,000, it wasn’t worth $250,000. It’s worth $300,000. What matters is how does your purchase price compare with the other sales. If you are paying over what other similar properties are closing for, then you could be overpaying. Hope this helps.
Ryan Kelly Group - Keller Williams5112 Reviews - 5yAndrew FreedBusiness MemberInvestor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
Originally posted by @Jay Hinrichs:
Originally posted by @Andrew Freed:
@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.
Orygun just came out with a bulletin on personalized letters as being potentially racist and to not use them.
Interesting, I have not heard that. Thank you for the insight Jay!
- Rental Property Investor · Greenville, SC · Member since 2019 · 30 posts · 13 votes5y
@James Wise Why do you get to know if the buyer’s current offer is their highest and best? That’s not how negotiation works.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes5y
Originally posted by @Robert Campbell:
@James Wise Why do you get to know if the buyer’s current offer is their highest and best? That’s not how negotiation works.
This comment doesn't make any sense. I have no idea what you're trying to say.
- Rental Property Investor · Member since 2021 · 335 posts · 193 votes5y
@Mark Abbate
I’m a bit late to the game here. I agree with folks here. Sellers market is tough. I stick to my budget. My wife and I are trying to find out primary and just lost for (3rd time) on a highest and best. We went 10k over listing. Overall, I understand primary home should not be viewed as an investment, but if it deviates from my budget. Hard pass, especially when our competition is bidding 50-200k over listing.
I’m just shocked about where all this money is coming from especially for SFHs. I’d rather deploy some $$ in out of CA areas and wait until Los Angeles cools down.
Good luck!
- Rental Property Investor · Greenville, SC · Member since 2019 · 30 posts · 13 votes5y
@James Wise I suppose I’m saying that, at that time, my offer IS my highest and best offer. When these agents come back with, “no, we want you highest and best offer”, that reads to me that they’re just the typical thoughtless, know nothing agent making a hacky attempt at seeing how much more they can get out of you. Depending on the agent, it even seems rude. Maybe I’m paying cash, maybe I’ll close in 15 days, maybe I’m willing to let them stay for three months, one dude in my neighborhood promised pest control for the next x number of years at the people’s new house, etc. There’s a million things that can make a deal. Agents are an unnecessary barrier between actual players. It’s difficult to get to an actual deal that’s beneficial for both parties. They’re only interested in one number, and that’s the commission. If I were the agent, and I got an offer, say 10% off of the asking... “Thank you for the offer! We’re certainly interested in working with you. Obviously, we’re slightly off on our valuations. How did you come to yours?”
I find that most agents aren’t interested in doing even that little bit of work. My feeling is that this is the draw for most to get into being an agent. There are very few legal rackets in existence these days, but this particular racket lends itself to this type of person.
- Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes5y
@Mark Abbate - In your case they might accept a 530k offer with 20k over appraisal vs your 560k with 10k over appraisal if the comps are going to come in at 490k. $510k is more than $500k. . .
Almost every well priced home is getting into a bidding war now. Highest and Best with a fixed date stop is nicer than the Highest and Best where the agent calls the second or third best and says, can you beat X? Usually doing multiple H&B is considered rude. This is one reason a qualified buyer might go straight to the listing agent to try to win the house. . . They “overpay” but they win the house. I can’t tell you how many times in the past month I’ve received a message “we’ve had 67 showings and 12 offers so far, highest and best by Monday at 6pm. Seller will review at 8pm.”
I just lost a fixer upper 4/3 1900sf in a 100 year flood plain (adjacent to a stream) while offering over asking with 25% down. I said as is but I asked for an inspection and mortgage contingency. I also offered cash as is with no mortgage contingency at 20k less.
If you waive appraisal contingency requirements / agree to pay over appraisal, you knowingly are saying I understand a 3rd party professional says the house is worth X and I am willing to pay Y and bring the additional money out of my pocket to the closing table to buy this house.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes5y
Originally posted by @Robert Campbell:
@James Wise I suppose I’m saying that, at that time, my offer IS my highest and best offer. When these agents come back with, “no, we want you highest and best offer”, that reads to me that they’re just the typical thoughtless, know nothing agent making a hacky attempt at seeing how much more they can get out of you. Depending on the agent, it even seems rude. Maybe I’m paying cash, maybe I’ll close in 15 days, maybe I’m willing to let them stay for three months, one dude in my neighborhood promised pest control for the next x number of years at the people’s new house, etc. There’s a million things that can make a deal. Agents are an unnecessary barrier between actual players. It’s difficult to get to an actual deal that’s beneficial for both parties. They’re only interested in one number, and that’s the commission. If I were the agent, and I got an offer, say 10% off of the asking... “Thank you for the offer! We’re certainly interested in working with you. Obviously, we’re slightly off on our valuations. How did you come to yours?”
I find that most agents aren’t interested in doing even that little bit of work. My feeling is that this is the draw for most to get into being an agent. There are very few legal rackets in existence these days, but this particular racket lends itself to this type of person.
This is just more speculative ranting. In addition, nobody is forced to use Agents so if they were "an unnecessary barrier" the free market would have eliminated them.
The data shows that roughly 88% of all home sales in the USA are done with an agent so your thinking is not aligned with the vast majority of the country.
- Rental Property Investor · Greenville, SC · Member since 2019 · 30 posts · 13 votes5y
@James Wise It feels like those 88% are playing the game so they don't get blackballed. So, an honest question, are you showing a FSBO if there's no commission in it for you because of your fiduciary duty to your client? Probably not. Why would you?
Real Estate agency is a broken system, and I'm sure that behind the scenes brokers are paying legislators to keep it broken. It's a simple monopoly on the marketplace. I don't blame them one bit. My hope is that the FSBO.com and Redfins and Zillow's of the world are able to break it down as people are seeing how dumb agency is. Peer pressuring your friends into letting you siphon money off of their biggest investment is not a profession.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes5y
Originally posted by @Robert Campbell:
@James Wise It feels like those 88% are playing the game so they don't get blackballed. So, an honest question, are you showing a FSBO if there's no commission in it for you because of your fiduciary duty to your client? Probably not. Why would you?
Real Estate agency is a broken system, and I'm sure that behind the scenes brokers are paying legislators to keep it broken. It's a simple monopoly on the marketplace. I don't blame them one bit. My hope is that the FSBO.com and Redfins and Zillow's of the world are able to break it down as people are seeing how dumb agency is. Peer pressuring your friends into letting you siphon money off of their biggest investment is not a profession.
Again, your lack of knowledge makes what you are saying nothing but a speculative rant.
For starters a real estate agent has no fiduciary duty to work for some schmo for free. So if a buyer was interested in a home where the seller wasn't going to pay the buyer's agent a commission the agent would need to tell their buyer "hey bruhhh, if you wanna work together on this house you need to pay me X amount." They then work on it or they don't simple.
In regards to sites like Zillow. 10-15 years after Zillow launched the amount of transactions involving an agent was actually higher than the year prior to Zillow's launch.
- Rental Property Investor · Greenville, SC · Member since 2019 · 30 posts · 13 votes5y
@James Wise I get it that you’re fighting for your life and you’re livelihood. I really do. And you’re right, I don’t understand the nuance of agency because it serves no purpose. The internet has an amazing way of rendering the unneeded truly unneeded. That’s where I see agency going. Millenials are going to see right through it, and I suspect we already are. Car Dealerships are no different, if there weren’t so many shady laws regarding how manufacturers can sell their cars, car dealerships wouldn’t exist.
As far as I’m concerned, as an actual investor and one who actively participates with real skin in the real estate game instead of only taking advantage of it, you might as well be selling Mary Kay.
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