Confused "Highest and Best Offer"

45 Replies

So I have been going back and forth on a bank owned foreclosure. We keep making cash offers and they hardly budge on the price. After a month of going back and forth they finally told use "Highest and Best" as they have multiple offers. So we put our highest and best offer. All cash deal. My broker just got back to me and said the bank has now countered our offer. WHAT?!?!? - They basically came down 1 thousand dollars from the last time we made an offer and they countered. I thought Highest and Best was just that. Can a bank B.S. you and tell you they have multiple offers when they don't. Im feel like there are no other offers and they are just trying to get me to go higher.

Just because there are multiple offers doesnt mean they are going to accept the best offer they receive.  

@Russell Brazil - I understand that. I just never heard of a bank making a counter offer AFTER submitting Highest and Best offer.

@Bill Dengler Happens all the time if there isnt an acceptableoffer on the table. Would you rather they just end negotiations with you? If so, you can always choose to end negotiations with them.

@Russell Brazil - So are you saying the bank basically didn't get what they were looking for when the stated Highest and Best offer and are now trying to negotiate to see if they can get closer to what they are looking for?

Originally posted by @Bill Dengler :

@Russell Brazil - So are you saying the bank basically didn't get what they were looking for when the stated Highest and Best offer and are now trying to negotiate to see if they can get closer to what they are looking for?

 Exactly. They have the number they are willing to sell for. Until someone pays them that number, they are going to continue to market the property and solicit offers and counter existing offers. It really isnt any different from any other sale. A seller wants X, and typically will not sell til they get X.

@Bill Dengler I agree with @Russell Brazil .  Banks do this ALL the time.  So do auction companies sometimes.   I have countered back for LESS than what I originally offered after they countered and they took it (ridiculous as that seems.)

It is hard to know what is going on and it can be emotional (which is part of their strategy..if there is one and it is not just bureaucracy.)  Get your number that works submit it and be firm.  Do not get into the "it's only X more so bump it up."    Just tell your broker, you have the highest and best.

@Richard Sherman - During the back and forth thats what I did. I went lower. Trying that strategy. But it didn't work. I had my top number that I will NOT go over and that is what I am holding at. I told my broker to counter back with the same offer I gave when giving "Highest and Best". Usually I don't care and keep the emotions out. But this foreclosure is not a flip or BRRRR. I want to fix this one up to be my primary residence if I get it.

@Russell Brazil   - Thank you for all your info. Help me keep the sanity.

Ahh, ok that makes sense.  If there is a reason to pay a bit more because you want that specific property, then maybe consider going up, if it isn't worth it then don't.  You could get the opportunity back at a lower price and as Russel said they might just keep marketing it.

Always a challenge in any purchase, how much did you leave on the table..in the big scheme of things, a fair price on something you want is a good deal even if you could have gotten  BETTER deal...sometimes your better deal never happens because someone else grabs your good deal out from under you.

My final offer was 345,000 cash and I waved inspection (I actually paid for an inspection when I first looked at the house so I would be wasting my time) and can close as soon as title cleared. They countered at 361,000

@Bill Dengler it is kind of like a reserve in an auction. They have a minimum value they are trying to get. Most likely your offer was highest, but they are trying to get to their "reserve" level. It is possible the outstanding debt is $361K or that is the minimum level they can take with write off percentage. 

I would personally hold tight at $345K. Tell them you had it inspected and given condition, that is a solid offer. Remind them it is cash and you can close quickly. They probably want to get it off their books by end of the year. There is a chance they will find another buyer, but I would call their bluff on this one. 

Banks are horrible at placing value on properties. All they care about is loan amount. They think every house is gem even though they probably never even stepped foot inside it.

Good luck.

@Joe Splitrock - My broker keeps doing just that. Reminds them we paying cash. We explained that it needs new roof, HVAC, pool pumps. And that is not items that are a nice to have. I am holding tight and I am not going a penny more. If they counter again I am thinking of going lower with my offer, do you think that is wise or should I just hold at 345k?

@Bill Dengler

When dealing with the bank, the term " highest and best " is loosely used and can mean anything. I bid on a REO, that had three rounds of " highest and best " . It felt like an auction that took forever and kept going up until last bidder won.

Terry

Originally posted by @Bill Dengler :

My final offer was 345,000 cash and I waved inspection (I actually paid for an inspection when I first looked at the house so I would be wasting my time) and can close as soon as title cleared. They countered at 361,000

Waiving the inspection for most REO's doesnt give you anything really. Most REO's have in their REO addendum a 10 day inspection periods regardless of whether you use it or not. They also typically will not negotiate 1 penny based on them, just allow an opt out on them.

@Russell Brazil - My thought behind waiving the inspection was that it showed that I could close faster and there was no way I would back out if they accepted my offer. I figure they want to get this off their books before the end of the year.

If you wanted to close and are firm on that, you can write in the contract that you will close by x date or pay a penalty. Make sure that performance is done on your part and if any delays does happen, which is VERY common in foreclosures as title is always a little messy, you are not actually penalized, the bank is and is obliged to extend the contract.

That's a great bargaining tool, you have cash, no contingencies, and ready to close on time! What more do they want?!

@Lien Vuong - The bank already stated a close date (12/21) We agreed as long as title was done by then. The ball is in their court. I personally think I am offering a very sweet deal. But I am not dealing with someone with emotions, I am dealing with a bank.

Originally posted by @Bill Dengler :

@Russell Brazil - My thought behind waiving the inspection was that it showed that I could close faster and there was no way I would back out if they accepted my offer. I figure they want to get this off their books before the end of the year.

 the issue is your not dealing with a private seller your dealing with the loss mit department or some other department.. what would motivate a private seller wont motivate the bank.. IE the inspections because their standard contract ( at least the ones we see on auction sites have inspection time lines )..  you just have to bid what your comfortable with and if you don't get it.. keep watching it.. sometimes it will take 6 months or a year then there it is up again for less money.. 

Originally posted by @Bill Dengler :

@Joe Splitrock - My broker keeps doing just that. Reminds them we paying cash. We explained that it needs new roof, HVAC, pool pumps. And that is not items that are a nice to have. I am holding tight and I am not going a penny more. If they counter again I am thinking of going lower with my offer, do you think that is wise or should I just hold at 345k?

 It is tempting to go down in price, but ultimately that could alienate them. If you really want to close the deal I would just hold firm. Maybe put a time line on it and tell them you are looking at other deals, so they see some sense of urgency.

@Bill Dengler    Hi Bill.  Asset Managers nearly always counter offer the highest and best offer.  They go through highest and best offer notifications so that the Listing Agent can make certain the Buyer's Agents are notifying their clients of the multiple offer situation, as it generally results in higher offers.  So all offers submitted can then be adjusted according to all parties highest and best offers by the specified deadline.   

My best guess.  Even though your offer was cash, there could be a loan contingency offer with a higher net.  My guess is that they gave you first shot of increasing your offer to match the loan contingency offer.  Cash enables you to close earlier if all goes smoothly, but Banks generally put a 30 day close on the final bank addendums to deal with any title issues, etc.. 

Cash is often attractive, but if it means the difference of netting $20K higher on a loan contingency, they will likely opt to respond to the loan contingency offer if you reject their counter offer.     

Some people made mention to the fact that you are waiving home inspection contingencies.  Many Asset Managers prefer you have an inspection contingency regardless, as they don't want to be viewed as trying to hide anything about a property, increasing their liability.  They have to disclaim all knowledge anyway, but denying inspections can be more easily criticized.  

"So I have been going back and forth on a bank owned foreclosure. We keep making cash offers and they hardly budge on the price. After a month of going back and forth they finally told use "Highest and Best" as they have multiple offers. So we put our highest and best offer. All cash deal. My broker just got back to me and said the bank has now countered our offer. WHAT?!?!? - They basically came down 1 thousand dollars from the last time we made an offer and they countered. I thought Highest and Best was just that. Can a bank B.S. you and tell you they have multiple offers when they don't. Im feel like there are no other offers and they are just trying to get me to go higher."

----------------------------------

You, sir, are being diddled. Move on.

Originally posted by @Bill Dengler :

So I have been going back and forth on a bank owned foreclosure. We keep making cash offers and they hardly budge on the price. After a month of going back and forth they finally told use "Highest and Best" as they have multiple offers. So we put our highest and best offer. All cash deal. My broker just got back to me and said the bank has now countered our offer. WHAT?!?!? - They basically came down 1 thousand dollars from the last time we made an offer and they countered. I thought Highest and Best was just that. Can a bank B.S. you and tell you they have multiple offers when they don't. Im feel like there are no other offers and they are just trying to get me to go higher.

 I bid $286k on a short sale property that was listed at $299k. The bank countered at $359k, $60K over the listed price. I just laughed when my agent told me. In not so many words, they were telling me to take a long walk off a short pier! So yes, the bank can certainly play games. Though there is a happy ending. A couple of months later my offer for $286k was accepted. 

Originally posted by @Russell Brazil :
Originally posted by @Bill Dengler:

My final offer was 345,000 cash and I waved inspection (I actually paid for an inspection when I first looked at the house so I would be wasting my time) and can close as soon as title cleared. They countered at 361,000

Waiving the inspection for most REO's doesnt give you anything really. Most REO's have in their REO addendum a 10 day inspection periods regardless of whether you use it or not. They also typically will not negotiate 1 penny based on them, just allow an opt out on them.

I just explained this exact point late last week to one of my clients. The banks have their (non-negotiable) addendums and most of the time an inspection period is included anyhow. So by waiving inspection, you're more-so just stating your intent that this can close quick, although many times it takes the bank at least 3 weeks to get their paperwork in order anyhow.

Bill - What matters to the bank 90% of the time is $$$. These are institutions with thousands of properties for sale at any one time. One property isn't burning a hole in their pocket unless its about to be lost via tax sale or has major building court issues. They'll call highest/best, higher than highest/best, counter, decline, etc until they get that dollar amount. And unlike a regular sale where the owner has emotions involved, dropping your offer isn't going to scare them into accepting unless that lower number is at least how much they want.

Timing also matters. The under-30-day # is going to be different from the 45/60/90/120 day #. So while your $345k might not get it done right now, it could very well be accepted after one of those time periods passes. Or even a lesser amount. But of course, the risk is that someone else could come in and snatch it before you do. Also, keep an eye on comps as the banks will frequently have new BPOs done to reassess their acceptable price.

@Bill Dengler We went through something similar for a place last year, where the asking price (per the seller's realtor) was $24,900. After touring the property we went in at asking. The seller's realtor came back with "there are multiple bids, please give us your highest and best offer," which we took to mean we had one shot. We had crunched the numbers and were comfortable with offering $30k, closing within ten days but at seller's discretion. We heard crickets for two weeks, then the property went off market, then two and a half months later sold for $29k. No idea what happened but I suspect someone either had an "in" or some family stuff may have been involved. After writing all of that I realize that none of this helps you a whit and I failed to provide any sort of answers or clarity. My apologies! Consider this commiseration :)

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