Home Buying in Atlanta>Question Details

ATL_Homebuye…, Home Buyer in Atlanta, GA

Are REO properties usually listed at the appraised amount?

Asked by ATL_Homebuyer_13, Atlanta, GA Wed Jul 17, 2013

I recently submitted an offer on a home (a few thousand less than list price). A few days later they came back asking for all highest and best offers. Does this mean all the offers were below list price? If I put in an offer above the list price and it doesn't appraise for that amount will the bank come down to the appraised amount?

Help the community by answering this question:


It depends!
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
0 votes Thank Flag Link Wed Jul 17, 2013
It's pretty typical for the bank to counter highest and best regardless of the offers received. They're just trying to squeeze out every dollar. If your offer is accepted, the bank may require that you sign an addendum stating that you are responsible to make up an appraisal deficit if there is one. They generally will not lower the price to the appraised price if lower than the contract price. Read your paperwork carefully and don't offer an amount greater than what you're willing and able to pay.
1 vote Thank Flag Link Wed Jul 17, 2013
Rodney is right, HUD homes are listed at the appraised value unless didn't sell for it during first bidding period. Than price gets reduced.
0 votes Thank Flag Link Sat Jul 20, 2013
Banks may or may not get an appraisal before putting a property on the market. The price they ask depends on there market strategy and wherever they get their information about the market. I'm thinking comics strips to horoscopes (no dis-respect intended to either). They may price it high with a plan to reduce the price steadily until they get an offer they like, or they my price it low in hopes of attracting lots of offer.

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.


Dave Herren
Best Atlanta Properties
0 votes Thank Flag Link Fri Jul 19, 2013
It can depend. You should know that "Highest and Best' just means they want everyone involved to bring their best offer because of the competition this will often drive the price about list price. Highest and Best is very common in this market because of the low supply of inventory and multiple offers. Even though you put your off above list price doesn't mean that no one else did or didn't it just means they want everyone to know there is competition and now basically to have a mini bidding war. You should decide a price that is what you are comfortable with paying and if the appraisal comes back differently then you know you are or aren't comfortable with that amount. Some agents do list the home below market value on purpose to move the home fast and create and this type of situation. Good Luck!
0 votes Thank Flag Link Thu Jul 18, 2013
All good answers - Jill's answer is short and sweet, and correct.

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.
0 votes Thank Flag Link Thu Jul 18, 2013
On HUD REO properties, they are almost always listed at the appraised value that the Seller obtained. When obtaining a mortgage, the Buyer's lender will order their own appraisal. The Seller's apprasial will have no impact on the 2nd one.

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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Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia with over a decade of mortgage lending experience.

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0 votes Thank Flag Link Wed Jul 17, 2013
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