Investor · PA · Member since 2013 · 1k+ posts · 602 votes
Is there a better way to word such an offer? Would it make sense to employ this kind of offer strategy or will it be frowned upon? Would the seller's agent find a way to jump straight to Y anyway?
The art of negotiation is a art and needs to be learned to succeed. Your offer does not fall within my definition of negotiating and suggests you want the property more than you should.
Your offer says this is what I will pay but I am willing to pay more - try me.
The message a offer should convey is - this is all your property is worth and all I am willing to pay.
Contractor · Pittsburgh, PA · Member since 2014 · 885 posts · 359 votes
10y
@Jassem A. you should offer something 'reasonable', so that they counter and then you can go from there. If you send them a crazy low-ball offer, you most likely won't get any help from their agent.
There is undoubtedly going to be multiple offers and they are going to ask for highest and best. I don't mind paying well over what they are asking but don't want to just fork over double what they are asking if it's not necessary to do so.
Contractor · Pittsburgh, PA · Member since 2014 · 885 posts · 359 votes
10y
@Jassem A. definitely don't put two numbers on an offer, ever, for any reason ... it won't go the way you want. Working with sellers and their agents isn't like buying a shirt on eBay, you're gonna have to put in some work on the negotiation.
The art of negotiation is a art and needs to be learned to succeed. Your offer does not fall within my definition of negotiating and suggests you want the property more than you should.
Your offer says this is what I will pay but I am willing to pay more - try me.
The message a offer should convey is - this is all your property is worth and all I am willing to pay.
Investor · PA · Member since 2013 · 1k+ posts · 602 votes
10y
Yes but I'm expecting there to be multiple offers and probably many will be over the list price. I don't mind paying well over the list price but was hoping there would be a way to word the offer so that I don't pay more than I should have to.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
10y
My last REO buy was like that, I posted about this. But, the not to exceed is also tied to proof of a bona fide offer to pay $1,000 more than the highest offer, not to exceed.....
I won! And it came back $1,000 more than my original offer but way under what I was willing to pay and that's what happens when a listing agent lies about other offers higher than mine, guess the bank didn't want to play her game.
Now, this works with REO, the bank is obligated to sell and they can be pressed to show the highest offer, but not so with individual sellers, but you might write it in for the agent showing they are not falsely pumping the price. :)
Investor · Cincinnati, OH · Member since 2012 · 506 posts · 331 votes
10y
@Jeremy Pace I'm not sure if laws are different in Ohio and Pennsylvania, but there's nothing here in Ohio that would require the seller's agent to present Y as your offer in this situation. In fact, the terms "highest" and "best" don't always equal the same thing. I've bought numerous houses with a lower offer but better terms than other investors who can't think creatively and believe that the most dollars always wins.
@Jassem A. these offers are legitimate, though most banks use systems that don't allow their agents to enter this type of offer. As a result, it's an agent by agent and broker by broker situation here in Cincinnati. Some agents/brokers will accept these types of offers and then wait to put your offer in until all of the other offers are received (so that they can do the $1,000 over). Most agents/brokers won't do this, however.
Contractor · Pittsburgh, PA · Member since 2014 · 885 posts · 359 votes
10y
@Sean Cole like I mentioned before, it's just bad all the way around. No matter what price the agent presents (it will be the highest one, almost every time, but whatever).
Let's say the agent is feeling magnanimous and subjects your lowest offer. The seller rejects it, because it's too low.
Now they move on to the next offer, you are notified of their rejection. They are no longer obligated to consider your lazy offer, because you haven't resubmitted it for chronological consideration.
Once again, offers to agents isn't eBay ... it's in poor taste, and it won't work the way you want ... unless you genuinely want to be frustrated.
Your offer does not fall within my definition of negotiating and suggests you want the property more than you should.
Your offer says this is what I will pay but I am willing to pay more - try me.
The message a offer should convey is - this is all your property is worth and all I am willing to pay.
I want to echo Greg here. Your offer needs to be empty of emotion. Offer your "best and final" - if it isn't good enough... WALK AWAY. If you overpay for something, just to make sure no one else gets it, you have only hurt your pocketbook.
Real Estate Agent · Lebanon, PA · Member since 2016 · 30 posts · 21 votes
10y
I have done this type of offer before and it's called adding an escalation clause. Last time we used this we ended up getting the house for the base offer and the clause was never used. This was for a client of mine who really wanted this one of a kind house and there were other offers. I have never done this with a REO.
Investor · Cincinnati, OH · Member since 2012 · 506 posts · 331 votes
10y
@Jeremy Pace you're either intentionally or unintentionally not understanding escalator clauses. They're used in multiple offer situations exclusively, so there's never a situation that occurs like you're presenting.
I've bought houses for $10s of thousands less than I was willing to pay by using these effectively. If you'd rather not use them, it's your prerogative. I choose to make more money by using all of the tools that I can instead of paying the most that I'm willing to pay when I don't need to.
Investor · PA · Member since 2013 · 1k+ posts · 602 votes
10y
In this specific scenario I think it makes more sense because my highest offer I'd still be happy with but if I can get it for less then that'd be a cause for excitement