Thought I would have a little fun on a nasty day.
Why do REO's go to highest & best with multiple offers?
With a conventional listing if I get multiple offers; I work one buyer against the others. On a REO, I go out with highest & best and select the best offer.
Why don't I work the buyers and see what the best offer I can get is?
On a short sale, I start a file and talk nice to everyone and see who is left when I finally get a number!
I have heard all types of semi legitimate reasons for the REO process, but they all are not really valid, as I do represent the seller and I am obligated to use my best efforts to get the best price.
I am now seeing some really low values being put on good properties and now there may be as many as 10 offers in the 1st couple of days. I had one with 13 of which maybe 5 were legitimate and instead of working the offers, I just sent out my multiple offer sheet and picked the best. It was a shame they could not close? I would have preferred to work all of the buyer's agents and gotten the best price as well as buyer.

I always use Best & Final...so to avoid lots of paperwork trail or they send me their final offer otherwise don't bother.

IMHO, Highest and best is the only way this system can work in our market.

Our AMs each have as many as 500 assets under management at any one time. They are seeing 50 - 100 offers per day (due to multiples on properly priced correctly), sign between 50 - 80 addenda and contracts per day, get 150+ emails per day, multiple phone calls (we average 75 - 100 emails and phone calls per day ourselves), not to mention extensions, requests for expense approval, requests from buyers for repairs on an "as is" contract, interface with the sellers, and do not have the time to play ping pong with several buyers.

Especially for an asset that may be listed at $20,000 - $100,000.

Highest and best does work one buyer against the other, without as much work, as they know that they must put in the highest offer they are willing to make and the seller will pick just one and not do multiple counters (even though the seller retains the right to do multiple counters I have Never seen them do it). We tell buyers agents that an average customer going for properties that are in multiple offers have to lose 4 prior to believeing that the buyers agent is telling them the truth that properties sell over list in this market (we average 5% - 25% over list, in 14 days or less, when it is listed at our recommended price).

Our customer is not only the seller but, also, the asset manager. The easier we make their job the more listings we get. We average 100+ per year and rising (with just 4 AMCs) because our montra is "Service, Service, Service and make the AMs life as simple as possible". Highest and Best makes the AMs life easier.

As stated before all just IMHO.

So what we are saying is - No matter how flat we make a pancake, it always has 2 sides?

I have seen this technique anger buyers and the buywers end up walking....

And an edge all the way around.

I have too. That is why we advise buyer's agents that they have to lose 4-5 before they come to reality. When the buyer's agents show the buyers what ours sell for as a percentage of list price and what the one that they offered on sold for they start to get the point.

We have had agents put in offers for the same customer on 3-4 of our properties well off list and lose them then suddenly they make a good offer and get it. Nature of the beast in our area.

We have agents cancel showings when we see that they have set up a showing and advise that we are in Multiple offer mode because their buyers do not want to compete for a property. That is why we try to call all agents who set up a showing after we have an offer to advise them of highest and best. Takes a lot of time but the agents seem to appreciate the info.

1. Grampa - are you saying that highest & best gets your seller the best offer; because I don't think you said that. I think you said it was the easiest.
2. MArealtor - who walks highest & best or negotiated. I have found that those that walk when they see competition have a reason in that they have no intention of competing for the property.
Again, which way do you think you will get the best price for your seller. The easiest is not the right answer cause we are at the margin here.
Again it appears the arguement will come down to easiest vs best and the kings will do the easiest and the peons will do the best? Do I hear the castles rattling? We had this discussion before titled property management vs marketing.

Jack - keep smiling - but realize the 'Highest & Best' has 2 parts.

Highest offer from an agent who has an informed and capable buyer that is following the instructions the seller has laid out, probably is the Best.

I have been asked to 'hold' all offers and only present the offers that have followed the instruction and not to even waste time on any others.

Time is money, it is amazing how fast they can happen when all the pieces are there and fit into place. So, as an agent following the seller's legal instructions, I do as requested. They know their business better then I do.

As a buyer's agent - we also need to inform our clients what the seller's instructions are. Inform them that they risk not having any offer considered, even if it for the largest amount, if the refuse to follow the instructions.

There is no argument to be made - follow the seller's wants or needs, or move on, or risk not being taken seriously and losing a property the buyer wants or needs.

Pretty basic stuff - I understand some buyer agents feel I need to hold their hands - but I don't. I let everyone know what is happening and really where I expect it to go - place your clients highest and best offer now. Laughingly, I have actually had agents ask if they could up the offer later if another appears better. I always tell them - not if the offer you gave me was your clients 'Highest & Best'. "Huh, what, I don't understand, what do you mean by that?"

Jack,
IMHO, H&B brings the highest price to seller that any able buyer is is willing to pay for that particular property at that particular time. Since we are still in a depreciating market if we sell it for as much as anyone is willing to pay today it is going to be more than anyone is willing to pay 3 months from now. If an asset does not sell in 30 days the sellers usually lower the price. Same at 60 days. After 120 days they usually go to auction.

In our area in the first 2 weeks buyers ask themselves "What do I have to do to get this property because it is a value and others will also be interested for the same reason I am?" (When we advise multiple offers and request H&B this confirms their belief and they up their offer to as much as they are willing to pay without a bunch of haggling.) This is both easiest and provides seller maximum sale price because it gets the buyer to their highest bid without 3 rounds of counter offers. It is also the most efficient way to get them to that price.

2 weeks to 4 weeks and it changes to "What will they take for it?" (Since no one else has made an offer they figure it is overpriced)

After 4 weeks it becomes "I wonder if the will take 50% or 60% off list?" (Since no one else has shown interest for this long they figure that the seller must be getting desperate. And they start to wonder what is wrong with the property since it has not sold.)

When we go H&B we average 5% to 25% over list. Seller gets top dollar today, lower carrying costs, and no additional depreciation on the asset. I see our job as provideing maximum return on asset value to the seller. The most anyone is willing to pay today and a faster closing serves that purpose.

All Just IMHO, but it works for us and our sellers are happy.

well said Grampa ... and 100% correct imho

One additional point. H&B does not mean the highest price is the only factor considered.

If you are an AM and have a property and it gets a cash offer, with no inspection contingency, and POF for 250% of offer price for $Y, and an FHA offer, that is pushing the envelope for the buyer as far a preapproval, 10 day inspection period, and even though they have a significantly higher offer price after you net it out (6% seller consession) it is only $Y + $3000, which one would you choose?

Also, a cash deal can close faster with fewer unknowns.

BINGO!!!

A cash offer for full price with no contingencies closing ASAP with verifiable funds and following the seller's instructions will beat a 120% offer with a mortgage that will close in 30days, just about every time - I just can't say always, even if I believe it


( I can't believe we're even needing to post this - it has been covered so many times before - jeez )

In cash we trust!
Only problem is how do you convey this to selling agent and buyers?

1) Why do REO's go to highest & best with multiple offers?
With a conventional listing if I get multiple offers; I work one buyer against the others. On a REO, I go out with highest & best and select the best offer.
A) Just because the seller requests H&B it doesn't follow that I won't push the offers up. Comments to the buyer agent such as: I can't tell you what the other offers are, but don't start packing, or The 75 day closing date will probably kill this.

2) Why don't I work the buyers and see what the best offer I can get is?
A) You still can.

3) On a short sale, I start a file and talk nice to everyone and see who is left when I finally get a number!
A) The current owner dictates how you'll proceed. It almost soulds like it's a H&B with some discussion. Just like answer number 1.

4) I have heard all types of semi legitimate reasons for the REO process, but they all are not really valid, as I do represent the seller and I am obligated to use my best efforts to get the best price.
A) There have been situations where the low buyer complains that they would have gone higher, but didn't get the opportunity. H&B negates that argument. Also H&B forms establish the paper trail so the AM can justify that they did in fact negotiate with all parties to obtain the highest price possible. Again, H&B does not interfere with the listers ability to push the buyers up.

5) I am now seeing some really low values being put on good properties and now there may be as many as 10 offers in the 1st couple of days. I had one with 13 of which maybe 5 were legitimate and instead of working the offers, I just sent out my multiple offer sheet and picked the best.
A) H&B is more than running on autopilot. We're still obligated to negotiate. Reference answer 1.

6) It was a shame they could not close? I would have preferred to work all of the buyer's agents and gotten the best price as well as buyer.
A) It was a shame and can be prevented. Rather than forward forms, one could comment on the strength of the offers. Perhaps along the lines of: the missing roof will prevent this VA financed loan from closing. Or, this lender (Harrys Mortgage and bait shop) has a demonstrated track record of failure to perform, etc, etc.

I suppose my take on highest and best is that I will continue to negotiate and make my recommendations until such time as the lender sends me instructions to the contrary.