Home Buying in 10803>Question Details

Tim, Home Buyer in New York, NY

In a bidding situation with multiple buyers on a new listing, if the broker asks for a highest and best

Asked by Tim, New York, NY Wed Apr 23, 2008

offer, what is the best strategy?

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18
The first thing is not to get emotionally attached to the property. Make your best offer on comparables and your own limitations. With the "mortgage crisis" we are experiencing now, appraisers are under very strict rules. So winning the bidding battle may not necessarily result in a lender willing to finance it.
2 votes Thank Flag Link Wed Apr 23, 2008
I'm assuming that the price for this property was set low to attract multiple ofers (buyers)...

In this case, you'll likely need to offer above the asking price, but be sure to stay within your personal limitations as well as checking the comparale sales for the area. Don't fall into the eBay mentality where you have to "win" the home at any cost, unless this is a home that you simply must have for some reason. Quite likely some of the offers submitted will be below the asking price, but it is also likely that someone will offer at least asking price in a situation like this.

Be sure that your paperwork is in order as well, since this becomes part of the offer. Submit a pre-qualification letter or pre-appproval letter from a qualified local lender and proof of funds for your down payment and closing costs along with the purchase agreement. A well-qualified buyer can often win over a less-qualified buyer, even with a lower offer price, in a situation like this.
2 votes Thank Flag Link Wed Apr 23, 2008
Tim,

I'm not a pro, but I do have a recent story to tell. I'm not sure if your dealing with a bank on an REO or not, but in my experiance "best and final" seems to be just another tactic to raise the price.

At the end of January I placed an offer on a home significantly under asking price, but right around what I felt was fair. The 'comps' were much closer to my price than thiers. We recieved a counter at very close to asking price. The counter also had the 'multiple offers/counters' box checked. It looked like there were at least a few other parties interested. We decided to walk. I'm not a bidding war kind of guy.

We later heard through our Realtor that at least one of the other offers was from another agent in his office. They had actually offered more than us originally. They recieved the exact same counter that we did. They even accepted the banks counter at the high price. While negotiating other details of the transaction these probable buyers found another home at a better price and pulled out.

A few weeks went by and we noticed that this particular property was still on the market, at the same asking price even. We decided to re-submit our original offer. Once again the counter offer came in at almost asking price. Once again we walked.

You would think that this story is over by now, huh? Well, it turns out that less than a week after we recieved that last counter from the bank the asking price was lowered. We discussed it with our Realtor. We didn't want to give the impression that we were stuck on this one house. We were not. We've actually looked at over 20 houses between the first time we offered and now, including the one the other buyers bought! In the end our Realtor convinced us it was prudent to once again submit our orginal offer for the third time.

This is where we got our 'best and final' notice. I bet it looked quite similiar to yours. Same wording, multiple offers, etc. etc. We talked about it, but decide to stick firm. We shuffled the numbers around to give a slightly higher sale price, but in return asked for more towards closing costs. To us, it was a wash. But the seller seemed to want a bigger number 'on the front page' so we gave it to them.

We are now in escrow. In hindsight, it seems to me that ,at least for that final offer, there was no other offers. I know, that's my opinion, but I've learned to trust my gut.

Hopefully you can gleem some insight from my rambling. In my opinion the best stratagy is to do your research and look at as many homes as you think is prudent. It really helped me to peg the 'true' value and place my offers where I thought they needed to be. Also, the advice about not getting attached to any particular property is probably really good advice in todays market.

I'm not sure what your hobby is, but think back to when you first got into it...You probably had no idea where all the best shops were or what a good deal on that piece of equipment was. But now that you've been doing for years, you can spot a bargain a mile away. Make house hunting your hobby for a few weeks and you'll get a pretty good idea what a home is worth to you. Once you know that, you'll know what to offer.
1 vote Thank Flag Link Wed Apr 23, 2008
A multiple bid situation can be one of the most angst ridden scenarios a buyer can encounter when buying a home. You often have minimal leverage and you usually won't know the specifics of the bids you're competing against. If you have buyer representation and your agent says "offer highest and best", I would recommend taking their advice. They've been privy to direct communications with the seller's agent and have a sense of how legitimate the demand for "highest and best" really is. If you genuinely want the property, you may have to pay more than you would have initially thought when you weren't competing against other buyers who may have different time constraints and motivations than yours.
1 vote Thank Flag Link Wed Apr 23, 2008
I just encountered this situation and thankfully won. You have to figure out what you feel the home is worth to you and pay that amount. Now if you are only staying in the home for a short time you may not want to overpay because of resale, now if you are in it for the very long haul then it may be worth it to pay a little more now. The other important factor is your terms, they can make a world of difference if you can move quicker then someone else, have better financing or are all cash. Hope this helps.

Chris
1 vote Thank Flag Link Wed Apr 23, 2008
Best strategy is an individual case basis. What is the seller's motivation? Price, time, flexibility? What is your motivation? For starters , have your Realtor provide you with the most recent sales in the area of similar homes. Take into account location, updates and whether or not this home will appraise for what you plan to offer. You want to come in as the strongest buyer - for instance how soon can your mortgage company provide a mortgage commitment? How soon can you close? How much will you put down? The strategy is formulated based on the willing seller AND the willing buyer's motivation.
1 vote Thank Flag Link Wed Apr 23, 2008
Tim,

Ive had this happen to me multiple times. Highest and best is a good approach however in real estate many issues can occur. Its very important to make sure terms are solid and that the potential buyer purchasing the home has very strong financial when deciding which buyer would be best. I like to make sure that purchasers on a multiple bidding situation get pre screened through a loan officer that I have worked with in the past to make sure that no hiccups or issues would occur throughout the transaction. My job as a listing broker is to make sure that I can get the seller the highest net but also making sure that the purchases who the seller would intent to get in contract with is indeed capable of closing.



Best,
Antonio Sanchez
Douglas Elliman Real Estate
http://www.antoniosanchez.elliman.com
0 votes Thank Flag Link Mon Dec 29, 2014
Hi Tim,

Though this question was asked in 2008, it is still very much pertinent to today's buyers. If anyone in the Trulia community would like to discuss this issue further please feel free to contact me directly.

Thanks,

Kurt Wiesenmaier
Real Estate Salesperson
Houlihan Lawrence, Pelham
1 Pelhamwood Avenue
Pelham, NY 10803

Kurt@HoulihanLawrence.com
Mobile/Text: 914-715-8339

(also see my original answer below)
0 votes Thank Flag Link Wed Oct 15, 2014
This question posted Apr 2008.

Seven years past and still getting responses.
Do you want the house?
How much do you want the house?

Increase offered amount, add authority by creating more assurance.

Most folks who think this is a gimmick stand by as others buy the house they wanted.
0 votes Thank Flag Link Sun Sep 28, 2014
Hi Tim,

There is no best strategy. There are too many variables to try to address this question effectively.

The best answer here is to work with an experience agent that represents you as a Buyer's Agent. You want to make sure that your interests are aligned and you come up with an effective strategy.

I'd be happy to meet with you to discuss your options.

Take care,

Kurt Wiesenmaier
Real Estate Salesperson
Houlihan Lawrence, Pelham
1 Pelhamwood Avenue
Pelham, NY 10803

Kurt@HoulihanLawrence.com
Mobile/Text: 914-715-8339
0 votes Thank Flag Link Sun Sep 28, 2014
Is the property a regular sale, REO, short sale--makes a difference by the way. What does your Realtor recommend--highest and best is just that--how much do you like the property and what is the most you are willing to spend in order to beat the competitors is a question only you can answer.

Anna
0 votes Thank Flag Link Thu Jun 11, 2009
Most of the BS answers on this page are from brokers.
Oldest broker trick in the book, higher bidder but cant tell you who or how much. Every place else in life from collectibles on ebay to fine art at Sotheby's you always know the other bids and bidders, full transparency. Most states claim to be protecting the consumer, in this case the seller. Understand that is who the broker is working for and likley getting paid by. There is no protection for home buyers from the state or the brokerage industry.
Best thing to do is ask for bona fides, if not produced, pull your offer. When the broker comes back to you later with a BS story about why it didnt close, simply submit a lower offer if you still want the house. Especially in this market. Dont get emotionally attached to one house and they wont be able to toy with you.
0 votes Thank Flag Link Wed Jun 10, 2009
The listing agent cant tell you what's the highest bid, but there are ways to get an idea. Hopefully your agent is an experienced neotiator, this makes a huge difference.
0 votes Thank Flag Link Fri Apr 25, 2008
Hi Tim,

We have purchased two bank owned properties and both of them were multiple offer situations. The bank wants to narrow it down and see what the best price they can get is. We decided up front what the max we were willing to pay for the house and those were our highest and best offers. On the first one it was right at asking price (it had been lowered several times already) and the second one was 2.99% above the asking price. You need to determine what the value of it is to you today and determine what you are willing to pay. Keep in mind what the fair market value is when you determine your number.

The listing agent can't say exactly what the other offers are, but a good buyer's agent should be able to get some info on the other offers. i.e are they higher or lower than your last offer, are they investors or intending to occuppy. Your agent should also be working to convince the listing agent (and thus the asset manager) that you are the best buyer for them to choose to work with. In the end though, the main thing to the bank is to get the most dollars they can for it.
0 votes Thank Flag Link Wed Apr 23, 2008
I have experienced this situation several times. In every case of mine the listing was bank owned. Also in each case my clients were very different. Some qualified for more than the sales price and some not. Some were investors and some wanted to make it their long term home. So depending on each circumstance I would educate my clients on this process and go from there. We were successful on a few and not on a few. You just have to put the clients needs FIRST.
0 votes Thank Flag Link Wed Apr 23, 2008
If legal in your state you can present your offer as an escalation clause. You can say, my minimum offer is ________ and buyer agrees to offer seller $500 above highest NET offer seller recieves not to exceed ___________. Seller agrees to provide buyer with verified, bonified proof of bench mark offer upon acceptance of this offer.
That should do it.
0 votes Thank Flag Link Wed Apr 23, 2008
If you really want the property you really need to decide how much you would pay more not to lose the apt. I'd be able to help you more if I knew if it was a co-op or condo, the asking price and your offer. Dont forget about the "Best" part, meaning morgage contingencies etc. If you want more advice please email me directly :) space@elliman.com
0 votes Thank Flag Link Wed Apr 23, 2008
Depending upon the amount buyer qualified for and if buyers are possitive that this is the house submit a bid a bit higher than the listing price.
0 votes Thank Flag Link Wed Apr 23, 2008
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