Why Don't TX Realtors Try to Get Buyers to Pay More?

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Why Don't TX Realtors Try to Get Buyers to Pay More?

Scott Pigman
Austin, TX · Member since 2014 · 139 posts · 89 votes

So today I got a lesson in how realtors work in Texas, or at least in the Austin market. I was more than a little surprised at how they do things and I'm trying to figure out if it's because of some silly regulation, some silly local custom, or if there really is an explanation out there that actually does make sense. 

First, some background on my previous experience with a realtor here in Maryland. When we put our house up for sale we received two offers on the same day. My realtor contacted the buyer with the lessor offer and let them know their offer was low so they had a chance to raise it. He never told them what the other offer was exactly, just that it was higher. To me that seems like the selling agents duty; to try to get the most they can out of the buyer while not being deceitful.

This weekend we signed an offer on a house we were looking at to the north of Austin. The asking price was acceptable and we were willing to pay it, but just the same we figured we'd see if they wouldn't take a lower offer. Doesn't hurt to ask for a discount, does it? Or so we thought.

Sunday our realtor told us that their was another offer on the property and that their realtor was telling us to accept our "best and highest" offer. I heard that and thought, sure, of course he's going to say to submit our best and highest offer, but certainly if we're low they'll come back to us to see if we are willing to go higher.

Well, today we found out that they're selling to the other buyer. No counter offer, no notice that our offer wasn't as good.

My realtor tried to explain this practice to me. I tried to explain why I didn't understand it. I'm not sure that either of us really understood the other. A couple of times it almost sounded like she was trying to tell me that "submit your highest and best" is a de facto code for "YOU aren't the highest and best", but then she'd say no, the may say that to the other seller too.

Anyways, it ain't like they're going to change their procedures on my account, but I'd like to at least understand it better.

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Gregory Tran
Involved In Real Estate · Austin, TX · Member since 2014 · 65 posts · 9 votes
12y

@Scott Pigman 

They do.

Highest and best means just that - put in the best offer you think you can make and that's that.  If your highest wasn't good enough, you wouldn't win anyways right?  And yes, that phrase is pretty common here in multiple offer situations.

Keep in mind that by asking the listing agent enough questions coupled with some experience in these situations, a buyer's agent can typically get a pretty good sense of where the offers will be.

Also, price isn't the only factor in offers.  You have to look at the entire contract as a whole.  

Take for example the following 2 offers:

$190k asking price

Offer 1:  $200k, 10% down, $100 option for 7 days, $2000 earnest

Offer 2:  $195k, 50% down, $500 option for 10 days, $4000 earnest

Offer 1 wins on price, but is it clearly the better offer?  

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  • Gregory Tran
    Involved In Real Estate · Austin, TX · Member since 2014 · 65 posts · 9 votes
    12y

    @Scott Pigman 

    They do.

    Highest and best means just that - put in the best offer you think you can make and that's that.  If your highest wasn't good enough, you wouldn't win anyways right?  And yes, that phrase is pretty common here in multiple offer situations.

    Keep in mind that by asking the listing agent enough questions coupled with some experience in these situations, a buyer's agent can typically get a pretty good sense of where the offers will be.

    Also, price isn't the only factor in offers.  You have to look at the entire contract as a whole.  

    Take for example the following 2 offers:

    $190k asking price

    Offer 1:  $200k, 10% down, $100 option for 7 days, $2000 earnest

    Offer 2:  $195k, 50% down, $500 option for 10 days, $4000 earnest

    Offer 1 wins on price, but is it clearly the better offer?  

    1Reply
  • Gregory Tran
    Involved In Real Estate · Austin, TX · Member since 2014 · 65 posts · 9 votes
    12y

    @Scott Pigman 

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  • Scott Pigman
    OP
    Austin, TX · Member since 2014 · 139 posts · 89 votes
    12y

    Sorry, @Gregory Tran , I still am hung up on the realtor actually taking a buyer at their word that their offer really is the highest they're willing to go, especially if they let the buyer know they're going to lose the property otherwise.

    Look at it another way. There are all these people on BP who wholesale houses. Now when they go talk to a homeowner and ask, "what's the lowest you can take for your house?" Do they really accept the owners word that they can't go any lower than that if the numbers don't work? Or do they make an offer that does work and see if the owner has more room to negotiate than they let on? 

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  • Scott Pigman
    OP
    Austin, TX · Member since 2014 · 139 posts · 89 votes
    12y

    I get that that there's more to an offer than price, and if we knew our offer was deficient we would have worked on other areas as well. But price is a useful simplification for the purposes of discussion

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    Well, how many rounds would you expect?  Best and Final, means just that.  Now you know.

    1Reply
  • Gregory Tran
    Involved In Real Estate · Austin, TX · Member since 2014 · 65 posts · 9 votes
    12y

    I understand what you're saying.

    Is it different in other parts of the country?  To be honest, Austin is the only market I know really well.

    If a listing agent has 5 offers on the table, and has told everyone to put in their best offer by Monday at 6pm, I feel like people should put in the max they want to pay.  And if the first time they don't and lose, surely the next time around they will.

    I guess another option is to shop the offers, say, tell the bottom 4 that they're not the top, and if they want to win they should raise it.  Then after they raise, do you go tell whoever is on bottom now that they need to raise if they want to win?  When does it end?

    To me, it's just how it is here.  It makes me hate being on the buyer side, and love being on the listing side :)

    Is there anything worse than going 5% over and still losing when there are 12 offers? :o

    Take all this w/ a grain of salt though.  Of course as an agent I have some kind of bias!

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  • Gregory Tran
    Involved In Real Estate · Austin, TX · Member since 2014 · 65 posts · 9 votes
    12y
    Originally posted by @Wayne Brooks:

    Well, how many rounds would you expect?  Best and Final, means just that.  Now you know.

     Wayne just condensed my entire post into two lines.  There is a lesson to be learned from that.

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  • Richard C.
    Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    12y

    Highest and best means they want to move ahead and are giving everyone one last chance to improve their bid. The realtor isn't running an auction. They are not going to come back endlessly to see if you will kick in an extra thousand bucks.

    It is always difficult to lose a property you wanted, especially for a personal residence. But there is nothing remotely uncommon, improper or unusual in what you describe. Happens here all the time, and I am a lot closer to Maryland than to Texas.

    Next time someone tells you that they want your highest and best offer, take them at their word.

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  • Paul Wurster
    Investor · San Antonio, TX · Member since 2014 · 129 posts · 79 votes
    12y
    It seems to me that the biggest incentive for realtors is to get the quickest deal done. A five thousand dollar difference in price is negligible to the agent, but getting a few more deals closed in a year will be substantial. There is some balance to this of course or else all cash offers would get you incredible deals.
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  • Scott Pigman
    OP
    Austin, TX · Member since 2014 · 139 posts · 89 votes
    12y

    Fine, fine, no one agrees with me. NOT the first time it's happened, sad to say.

    But yes, @Wayne Brooks & @Richard C. I DO DID expect it to be run like an auction. What kind of auction would it be if the auctioneer only took one bid? It takes, what, 30 seconds to send a text message, "Your buyer's offer isn't the best." Sure I can see a limit to how many rounds you'd let it go for, but just one? Really?  (yes, yes, I know the answer to that question now).

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  • Scott Pigman
    OP
    Austin, TX · Member since 2014 · 139 posts · 89 votes
    12y

    Oh, and by the way. This particular house was listed on Saturday. So I'm not buying (Ha! no kidding!) that they didn't have any more time and had to "move ahead" already.

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  • Lisa P.
    Investor · San Antonio, TX · Member since 2014 · 20 posts · 5 votes
    12y

    If everyone understands that you only have one chance to put in your final and best offer, they are more likely to bid high if they really want the house.  It is what I did for our personal residence.  The house was perfect and I figured I would bid high enough to feel confident we would get the house, but not so high I would get buyer's remorse.  If I knew it was going to be an auction, I would have bid in increments of $1000 and would have probably gotten the house a lot cheaper.  But again, knowing I only had one chance to put in my bid, I offered a lot higher than I would have otherwise and the seller and I both walked away very happy.

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  • Joseph Weisenbloom
    Investor · Austin, TX · Member since 2013 · 443 posts · 174 votes
    12y
    Its just a method that the realtor uses to sell the property at the highest price. They can do that because there are a lot of buyers bidding on the same peoperty. If they didnt have lots of bidders they wouldnt be able to use the competing bids against each to jack up the price. This is common in overheated markets like Austin. I had the same issue with properties up in Dallas.
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  • Richard C.
    Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    12y

    Scott, no one is trying to be unkind, but all this whole thing means is that you don't have experience putting in an offer where the seller has multiple potential buyers to chose from. This is just how it works, and I would bet a whole lot of money this is how it works in Maryland too.  Highest and best means no more games, this is your last chance to improve your offer. 

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  • Richard C.
    Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    12y

    And while I hate to disagree with Joseph, I am going to do so. It isn't just about price.

    If a realtor or seller let's you bid up in increments until all but one buyer backs out, they have lost much of their opportunity to sell to the lower bidders if something happens with the high bid.

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  • Scott Pigman
    OP
    Austin, TX · Member since 2014 · 139 posts · 89 votes
    12y

    @Richard C. I never meant to imply I thought anyone was being unkind.

    Now I know that it ain't an auction.

    I feel like Grandpa Simpson yelling at a cloud. 

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  • Mark Gallagher
    Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes
    12y
    If the seller's realtor kept going from person to person, they would likely alienate bidders in the process. The other offer must have been plenty good for the seller to accept. If you went to a highest and best and the offers were lousy, then I would expect the back and forth that you were looking for.
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  • Hattie Dizmond
    Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
    12y
    For the record, the seller's agent acts at the behest and in the best interest of the seller. If I. As the seller am told there are multiple offers, and I tell the agent to go get everyone's last best offer, that's what he's going to do. I may not want to screw around with a bidding scenario. I may simply want to sell the house fast, and am looking for the best offer...price and terms. The realtor is obligated to present every offer to me, unless I've instructed them not to present offers that don't meet my min asking price, aren't pre-approved, etc. As the seller, what we do in a situation with multiple offers is my decision, not the agent's.
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