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.

When you get offers do you submit all offers to the AM? or do you pick the best ones and then submit those selected ones to the AM?

Do you do it right away within 24 hrs of receiving the offers or do you wait until you have a few?

I submitt offers as soon as possible after receipt. If we have a few when we come in in the morning, we submit along with the suggestion of H&B. If after H&B we have some obvious deadwood, I'll email the AM that we have 12 or whatever, 3 are financed and low, 1 is financed and decent, etc, etc. Do they want them all or just the top few. We just had a multiple with 15 offers. They only wanted those above $140,000 cash. BTY, our BPO was 140, the appraiser was 90 and they followed with a 94.9 list. Highest was 156 cash. We had negotiated that up from 125.

In FL we are obligated to present all offers unless intructed otherwise by the seller (such as do not submit verbal offers) for what ever reason the seller desires.

When we get the second offer we advise the AM and recommend a date to allow for other offers which they usually agree to. We try to have at least 1 weekend in the timeframe. We advise all offer agents and subsiquent showing agents that we will accept offers until X date at Y time. We also advise that we will upload any other offers until one is accepted. Once we have an accepted offer our sellers do not want any others uploaded and do not take backups.

Assuming it's a real cash deal. I "love" getting cash offers that come over with a hard money pre-qual letter instead of a bank statement or bank letter. If you have to ask a buyer if they know what cash means, that's probably not a good start to your transaction.

Awesome feedback from the pros here. TY!

When we have 2 or more offers on the table and the AM asks for H&B, we always change the MLS listing remarks to reflect the call for H&B to ALL interested buyers using the same cut-off time indicated by the AM.

NOT that all or many BAs take the time to actually read the remarks, but it does cover us from BAs claiming their buyers were iced out. But the seller's terms have changed, and all interested parties should be notified of that change.

You are a Pro also. Keep up the good work that I personally know you do and you will do well. Since I have first hand knowedge of how dedicated you are with buyers you will do very well.

Best of luck.

lol ... sadly true

North Texas.
Don't you just love the hard money lender letters. If it looks like a duck, and I'm hearing quacks, it's a duck. A loan is a loan, is a loan. I can't tell you how many times I've told co-brokes. The funds may not be coming from the usual source, but it's still a loan. I don't much care if it's "biggest bank ever" or "Louie the loan shark". AND the 10% EMD will not be refundable!
The world is full of idiots and they all seem to have our phone numbers!

Yeah--there's a hard money guy here whose name is "Handsome ****". I have absolutely no idea why somebody would borrow money from a guy/bank/lender named "Handsome ****"--the name alone should let you know that you're about to be ****ed.


I've figured out how to solve this problem. I ask agents who do this if the buyer is using their own personal funds from their own bank account since they obviously filled this out as cash. When they say no, I let them know the offer will be submitted, but a note will be made to the AM about the agent's, or buyer's, inability to fill out a contract correctly and that I am concerned about their capabilities to complete the transaction. I usually get a correct contract offer after that. hehe

I'll bet Hansome **** has an ugly way of collecting.

For me, the highest and best is not working for the best interest of the seller, but I guess it's the easiest and fastest way to get the commission check for agents out there...

Interesting. Based on all the other posts here would you care to elaborate on why you feel this way?

Also, do you have any involvement with REO listings? I checked your list of posts. You do have a book you hawk. Perhaps H&B conflicts with your book sales? Or is it the pass through pay per click?

x2
I'd love to see 'Codythebest's' answer to this as well ...

Highest and best was not a scenario created by the agents as a fast and easy way to get a commission check. It's client driven and believe me they could care less how fast an agent gets a commission check or how hard they have to work for it. Although the preceeding is a given to anyone with REO experience.
The cover of your REO bible states "You are about to discover how to make a six figure income by selling your listing to your buyers!".
Most clients would prefer that we bring in best offer from ANY buyer, not just our own buyers. Perhaps the clients instituted H&B to prevent the listing agent, in their quest to earn a six figure Income, from unfairly denying the co-broke the opportunity to seek their own six figure income.
While many, including me, may defer to your ability to sell books, Just as many will never take a back seat to anyone when it comes to servicing our clients and selling their property. And many of those same agents will sell through co-brokes and pull seven figure incomes.
In closing. Ditto to Grampas comments.

In case there is any question - that was tact from this forum.

If y'all will indulge my attempt at an euphemism - I submit:

Once upon a time, after talking to an abusive, belligerent and difficult customer and getting the guy to leave while scratching his head about he was told, I stopped laughing long enough to listen to 'my Grampa' who had just done the talking, and he told me that he just used 'Tact' - which he told me was, 'the ability to tell someone to go to hell, and they'll be happy to be on their way'. I never forgot it and I get amused from time to time to see real 'Tact' in use.

I agree. Lowest and worst works much better...

LMAO ..

Sounds like your "Grampa" was a wise sage. Glad you got the benefit of his wisdom. I never met any of my grandparents so am learning as I go along. I hope I can someday be to my grandchildren what your "Grampa" was to you.

Also, LMAO at NTB's "Lowest and worst" post. Guess somebody forgot that you shouldn't bring a knife to a gunfight and that in a battle of wits, at least on this forum, if you are not on the up and up you will find yourself unarmed.

Lowest and worst...Not tactful, shame shame, but funny a he**.
You should write a book. Oops, that's job's taken.
ROFLMFAO

Another factor some newbies seem to ignore - we are doing what the seller instructs us to do - it doesn't matter if they want to sell it to the third offer, only to a cash deal, only if they get their mortgage from BA - or if they want the offer printed and sent FedEx on yellow legal size note pads - the call is not ours to make is the seller's requirements are legal instructions.

Be careful Jack - You're sounding more like the rest of us - you had better see your doctor soon - lol



btw - pass the bottle would ya

Well I certainly got a lot of comments; but I missed the one where someone said that the H&B got the best price from the best buyer.
I looked and did not see that in any of them. As we have the "boots on the ground," isn't that kind of an obligation. Most true we must do what we are told to do and H&B is was we are told. On a conventional listing, I doubt the seller would tell us that; he would tell us to decide who were truly capable of closing and see what we could get.
Am I right or what and don't quibble.
As usual it boils down to what is it marketing or property management.

I tried my best to answer every question you raised line by line. I'm referring to my first answer, not the book store answer.

Maybe the rest of just miss the boat on this then, but smiling - what is 'Best' for our clients and who gets to make that decision - me, you, us - the real estate agents???

Would you please tell us what 'Highest' means in this context??

Would you please tell us what 'Best' means in this context??

And... who makes that decision??

After you explain what these terms mean, then we can see your thought processes.

I’m going to take another shot at this.
I will agree that H&B doesn’t always bring the best offer. But that’s more a function of how the agent handles the process rather than the process itself. The H&B form is sent to establish the paper trail, thus insuring all are given a second chance and forcing the lister to play fair. There are those agents that pay no attention to the “best” in highest and best. The need to negotiate is present, regardless of whether there are 1 or 20 offers. One could say that some agents aren’t negotiating or even discussing offers, they merely enter them, go back to sleep, and wait for an answer. Others will call the co-broke(s), attempt to address any deficiencies, present a critique on merits and shortcomings of the offer(s) to the seller and make a recommendation. Negotiations on an REO or conventional sale aren’t that different, except there’s no emotion involved with REOs. (Unless one considers the urge to choke certain co-brokes as emotional). When I discussed this thread with my partner and offer negotiator, his statement was that multiple offers were much more work than single offers (Royal PIA was his exact comment) since it requires a multitude of emails and/or conversations explaining the process, pushing the offers up, plugging the holes in the offers, and getting rid of mindless contingencies. The H&B system is only as good as those using it. It’s sales and negotiation, not order taking or fill in the blanks. Even without multiple offers on the table, the comment “The property is generating a ton of showings, (stated even if it’s a dog) I wouldn’t be surprised if we’re in a bidding war by “pick a future point in time”. Make them nervous and you can generate a one person competition.
On the flip side, if H&B is handled with fax a form to the buyers, from there fax it to the seller and wait for an answer, that’s an order taker. The only thing lacking is they don’t ask whether you want fries with it. But again, that may be a flawed agent, rather than a flawed process. As my Floyd Wickman instructor said “Houses sell houses, Brokers screw up deals”. Handled properly, at the end of the day, we’re going to the closing table with maximum money and minimal headaches.

You forgot - and Hogs Eat (Floyd's Hogs that is - lol)

If you read all the responses here you would be able to figure out that H&B does bring the maximum return on asset value to the seller. For all of the reasons discussed. You seem to be tied to the belief that you, in negotiation, can effect that outcome.

My belief is that (in a depreciating market as we are in) that shortest hold time (Because the seller has carrying costs) that haveing the most people bidding the maximum that they are willing to pay TODAY brings the maximum return on asset value to the customer.

But, Please feel free to believe what you wish and do what you feel you need to do. This discussion has been done to death on this and other treads. You may want to read some of them as well. All just IMHO.

JackREO - Hats off to your answer. I also believe it is a combination that will get the best offer to the table; the starting point is very immaterial.
I don't think just send the H&B out and going back to sleep is the best way to handle it. I really don't think Grampa does either.

I do not believe it is just sending out H&B and then going to sleep but, Yes, I do believe H&B brings the maximum return on asset value to the seller in a depreciating market.

~ deleted content as it did not fit subject ~

If as a listing agent you are truely working "highest and best" sometimes you make independant decisions of the seller. I have one that I received 2 offers, submitted them and sure enough - even after an independent e-mail to the AM asking for her to put the deadline for H&B at 5pm on the 6th - the deadline was set for July 4th. So, I verified with the loan officer doing pre-quals - this will go 203k FHA without too much fuss - she was off on July 5th. I had 23 showings between the 30th and this morning - so I set the deadline as 5pm on the 6th (today). I e-mailed the AM again - explaining the need for the pre-approvals - their requirement - and of course - no response - beacause they are off for the holiday. I will be scolded - this I know - I bucked the system - I am missing the task deadline - it is glowing red - but my definition of highest and best - is to make sure that the seller (bank) does not screw it up. Now they may take a cash offer - they may take an owner occupied 203k - as stated above - not my job to try to figure that out. My job is to make sure that all agents who have a buyer and need a pre-approval letter - or denial letter - to submit an offer - have the opportunity to get that letter. I sent an e-mail to all agents that showed the property from the day of the price reduction to present day. Posted it in the MLS and told my front desk to inform all agents scheduling showings of the deadline. I may end up with squat - but I think by the end of the day - I will have at least 6 or 7 offers - with at least two of them over list. It is easier to get forgiveness then permission - and I am gonna be asking for forgiveness from the AM at the end of business today. Does it make sense - nope - but I made a judgement call and I am gonna stand behind it.

Time and time again, we have to keep AMs from shooting themselves and the seller in the foot. They want this process to be "push botton", no thinking, no understanding, just push a botton and get results. Whether that result is good or the best result doesn't matter.

We stopped teachng logic and problem-solving in schools a long time ago. It no longer matters that the right answer is found, only that you tried. You still get a prize, or a paycheck.

lol - I would to get aggravated back then - I would get only half credit for the right answer if my work didn't match the teachers. No one back then liked people out of the box - and they never built a box yet that can hold me.

Pine - me too. I got the answer but I "didn't show my work". Flunk.
We did get 7 offers - ooo I was right on - four over list - missed that - but the winning one was owner occupant - 203k rehab loan - so I guess cash doesn't always win. Now I must try to survive the 203k process. Poo.

I was in a highest and best situation and lost out at first. My client put in a fair market value for a home right on the ocean, at first we didn't get it because there was an all cash offer $50K over our over asking price offer. So the listing Agent says to me, hey we will put you on as a backup and if the current buyer falls through, then I will call you.

I couldn't believe the Listing Agent because typically, they like to start the charade over again with putting back on the market and soliciting more offers. Well surprise to me, he actually called me back and told me the current buyer isn't going through with it because he was an out of town Investor who flew in and said, this is not for me, I want out.

Long story short, we got the deal, closed it. I have to say, the listing Agent has the most ethics I've ever seen in this REO listing Agent arena whereas there aren't too many that do.

We always keep all of the other offers when we are multiple. First thing we do is call all of the non-winners and let them know. Enlighted self interest and you do have a reputation to maintain.

Happy it worked out for you.

It also reminds me of a parable.

"The early bird gets the worm but the second mouse gets the cheese".