Does this sound right?

Question

REO property listed at 112k. Place needs some work, nothing too major.
                    
                    Working directly with seller's agent.
                    
                    House has been on the market for only a couple days.
                    Initial conversations with agent is guiding me to offer over asking price, with supportive reasoning. Also tells me there is other interest and that pricing is done under market value on purpose. 
                    
                    A few days go buy and I take no action.
                    
                    I call to make an offer. Sellers agent tells me that's there's another offer on the table and wants to know what I'm going to offer so I don't waste anyone's time. I say 102k. Agent says that's near the other offer and to expect a multiple offer disclosure and be ready to give best offer, with POF. I sign it and send the requested docs.
                    
                    Next agent tells me that other offer is over asking price but can't say exactly how much. I offer 114.5. Cash, no continginces. Agent says that's good. Next day I get a call saying it's accepted.
                    
                    Does this sound like a typical/atypical negotiation?

Brian Levredge · Answer

It's not uncommon, but you need to be careful that you are not being gamed by the seller's agent into bidding against yourself.  You don't say what the house is worth ARV or what your intentions are to do with it.  If you are rehabbing/flipping, your highest and best price is going to be based off of the conservative end comps less repair costs, carrying costs (ins, taxes) and your desired profit.

I've had the same exact scenario happen to me as well and they the bank wanted my highest and best.  I stuck to my guns and lost to the other bidder.  The property fell out of escrow and I put an offer on it again at the same price.  They said it was a multiple offer situation again and I stuck to my price (all cash, no contingencies, with large up front EMD) and got it.    The key is not to get emotional in your desire to do a deal.  Now if this is a personal residence, then it's a different story.

Matt Kearney · Answer

Hi Brad,

As the others have stated, this happens all the time.... especially on a new listing that is priced right.

However, recently I have noticed a couple banks not even going to highest and best.... they are just taking the best offer that comes in out of the first round of offers.

So now I am coming in with my best offer right off the bat... even if it's 40k over the asking price, as long as the numbers work, I will make the offer.

Shannon Feol · Answer

VERY TYPICAL as of lately, in my experience.  I make tons of offers on REO's each week and it seems that every REO listing that is priced to sell ends up in multiple offers and the price is bid up over list price - sometimes WAY over.

If you bid on a listing that is priced "right" from day one or has just had a price reduction, prepare for multiple offers and your ABSOLUTE highest and best offer.

Jeffrey K. · Answer

The agent does not really stand to make much more money by making you raise your price by 10k.  If we want to play this game, the only thing I could think of is that she might want to look good to the bank so she can get more listings (dont think this is the case).  
          
          The key is to get to a listing that is priced right in the first few days (before it hits Realtor.com) or after a long time (even then some banks arnt willing to drastically reduce the price).  If you get to it quickly and it makes sense, offer more than asking, but in an odd way.  I would try like $1300 or $1550.  Some banks dont waste time with highest and best.  Some people even write highest and best on the offer (you have to stick with it if you write it though or you look like a push over).
          
          If you are a repeat buyer, talk to the listing agent and tell him/her that you want to buy more properties in cash and to please let you know when something is coming up.  They will often let you in early and you can have an offer ready before anyone else even gets to see it.  This is a dirty game so meet some realtors and play it with them!

Brad W · Answer

Shannon and Brian, I appreciate both of your replies.
          
I was concerned with the idea of bidding against myself, since there is almost no transparency in this stage of the transaction. I would hate to think that brokers give out multiple offer disclosures when there's really only one offer. It doesn't seem legal.

It's going to be a live/rent situation. It's hard to gauge values in this particular subdivision because so few sales have completed in the last year, though there are a lot under contract. By the information I've been able to get, it's going to be pretty close to market value after repairs.

As I was waiting for an answer, I inquired about another REO in a close by subdivision, which probably required less work. It was brokered by a different listing agent and that agent said there were already 15 offers well above the asking price and offered to throw mine into the mix. I declined and was not contacted again. Its status changed to 'under contract' in the MLS 2 days later.

This is a desireable area with a lot of distressed properties but it's not a major metro location so I didn't think it would be so competitive.

Shannon Feol · Answer

by the way, congratulations on your accepted offer!

Does this sound right?

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