Does it really work - to offer "$ OVER HIGHEST"?

Question

I kept hearing people saying when in a REO situation, if the bank came back with a "HIGHEST AND BEST OFFER IN 24 HOURS", presumably in a multiple offer situation...that you could offer them $1 or $100 or $500 OVER the highest offer - provided that they can show you that there is a genuine offer for that amount.

Not to mention you are at the mercy of a crazy buyer who is willing to overpay...unless you have a built in contingency that gives you an out.

I assume if you are willing to do that, you are really calling them bluff.  If so, then don't increase your offer, leave it.

But let's say you are willing to pay $100 over the highest, would you really write that into the contract?  How would you word it?

OK is this just talk?

Rob K. · Answer

I would recommend that when you make any offer, make it for a weird amount. I can tell you that it works. The last house that I purchased was listed for $39,900. I offered $36,036 cash. After my offer was accepted, the listing agent told me that there was another offer for $36,000 and two more offers that were higher, but had mortgage contingincies. My extra $36 got the deal.

One time I purchased a HUD house that I figured when I walked through that I would buy it if I could get it for $10,000. I thought to myself, "What if someone else offers $10,000?" I offered $10,150. This was a few years ago when HUD posted all of the bids. Sure enough, someone else offered $10,000.

I bought another house from a bank that I offered $12,111. Later, I was talking to a friend that had offered $12,000. My $111 beat him out.

As far as writing $100 over the highest bid, I don't think that will fly. You need an actual number. I've learned from experience that a weird number can make the deal. Think about what you were going to offer and then add a little bit. You will be suprised at how many times it works for you.

Will Barnard · Answer

Rob added great info regarding offer amounts. I have done this many times and in addition to the reasons he mentioned, offering an a,out that is not a perfect even number gives the illusion that intense and specific financial calculations were used to arrive at a max offer. While it may not be your highest, it gives the impression it is. Has worked numerous times for me in the past.

Will Barnard · Answer

My opinion that is a foolish thing to do. As an investor, it is all about the numbers. When I make an offer it is based on numbers I can work with and has 0% to do with what others have in mind.

Dell Schlabach · Answer

I have been in a lot of highest best situations.

Not quite sure what you are asking or trying to figure out.

Say you write wording in your contract that you would pay 100.00 over their highest

What if someone offered 20k more that you would be able to pay

Debbie Farmer · Answer

I'm a realtor and I've seen this before on properties (traditional and REOs) and it works...sometimes.  However the caveat is that you leave the appraisal contingency in place.  That will give you an out if your offer was over market value.   I received an offer the other day from a buyer willing to pay $1,000 over the highest offer price, (there were 22 offers) but the buyer refused to remove the appraisal contingency so my seller passed on that offer.

Mark Brian · Answer

I would suggest making your response to highest and best say $100 over next highest offer up to to a maximum of (the highest amount you would pay).

Will it work? Good old fashioned MAYBE. Depends on if the LA will explain it to the seller/AM properly. Or maybe the LA uses your offer to get their buyer to place an offer $1 above your max...

I have seen this strategy but not on a REO (was on a listing of mine). It did not work because someone else was willing to go higher than the bidder that used this strategy.

Chuck Redman · Answer

Rob K  Interesting idea! I can see where this could help.

Chuck Redman · Answer

James Vermillion That makes sense!

James Vermillion · Answer

Highest and best is not unique to REO purchases, it can happen anytime there are multiple offers on a property. When it comes to REOs, it may not be that the min acceptable bid was not hit, it  may simply be that there were 2 or more offers and the bank is countering the multiple offers by asking for the best offer, trying to fetch the highest price.

Chuck Redman · Answer

I have read this to mean that they did not receive offers high enough to meet their "minimum acceptable bid" and they are asking the ones who submitted bids to re-offer with their highest bid based on the assumption that their first offer was low balled.

Does it really work - to offer "$ OVER HIGHEST"?

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