I know that's a terrible response. Let me explain.
Often a bank will contract a real estate company to sell a property in 30 days. Success means the real estate company will get more propeties to sell...providing they do it in 30 days. The assurance this will happen is by listing the property signifcantly BELOW market value. The intent is to get several folks (could be dozens) to submit a purchase offer to get a TOO GOOD TO BELEIVE ...DEAL.
You, as an informed and expereinced buyer, completed your due dilegence and know what the market value is, right? That's how you identified the list price as "TOO GOOD TO BE TRUE!'
Now the selling agent will solict, highest and best, to see who REALLY wants the house. Be aware, in the overwhelming number, IF the bank accepts a financed offer, they will reduce their acceptable price if the buyer presents an appraisal related to the financing contingency.Very often, such properties will go to the highest CASH offer. FOR ALL THE OBVIOUS REASONS.
Another scenerio has the bank wanting the highest possilble price. This requires the listing company to list the house at the TOP of the market value. The strategy is to reduce the price $10,000 on a weekly or biweekly basis until the real buyers present an offer within 3% of asking price. Again, to avoid a banks FIAT appraisal, cash offers have clout.
A third scenerio will have the price set at market value....and everyone waits....for the market to overtake this set price point.
Highest and best is simply futher negotiation. The only thing that you should be concerned about is, "what is the market value' AND, "what is this house worth to ME!" Your purchase strategy should anticipate a fiat appraisal, but YOU should have a plan to prevent a fiat appraisal from standing between you and the house you can afford. Be aware, the appraisals only purpose is to allow the bank to resell the mortgage. It has but a casual relationship to market value. This is why every bank imposes differing 'comparable' criteria to the appraiser, to satisfy the investment group who will untimately purchase the mortgage. If you want the home, have a strategy.
From this understanding you respond accordingly
Best of success,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
Either way, a request for highest & best just means they have more than one offer and they want to see who will give them the very best offer. Hint: they are looking for an all cash offer with no contingencies and a fast closing. An appraisal only matters if you make it matter. That is, if your offer included a finance contingency, which gives you the right to terminate the offer if the property appraises below the offer price, AND you cannot or will not make up the difference AND/OR the bank will not reduce the price.
Your Realtor can help put you in the best position to win the bidding war, but they cannot guarantee that you will win.
Best Atlanta Properties
As for appraisals, they are very much art and one mans opinion - they are not science. There can be a different value number based on who and what the appraisal has been ordered for - and guess what - the main source of data an appraiser uses, is the MLS! That is the most powerful database there is - and every agent has access to it - the work agents do actually creates the data everyone else uses. The key is in knowing how to use the data and critically - in being able to pick appropriate comps that are relevant - that is where appraisers are (at least in theory) supposed to be a little better than agents in arriving at value. However, I have had to contest appraisal based on inaccurate comps, and because relevant comps were left out that supported the price. Why were they left out - was the appraiser incompetent - did he have an attitude about the market, about real estate agents, was he biased too heavily in protecting the banks investor/note buyers - rather than reporting the real value? I don't know - each appraiser is a different individual.
I will disagree with Annette's answer only in so far as the last line - if you want the home - don't just have a plan - clearly you don't have enough experience to deal with this on your own - especially up against the banks one-sided contracts - make sure you have a great buyers agent to help you and protect you.
You would really need to speak with your Buyer's Agent about your specific sitation.
The seller asking for "Highest & Best" simply means there are at least to active offers. This means that each Buyer needs to re-evaluate their original offer based on how much they want the property. The Seller is under no obligation to reduce the sales price if the Buyer's appraisal comes in lower than the sales price.
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