Highest and best offer...

By
Real Estate Agent with Long Real Estate

My business partner and I have been working with several buyers lately who are interested in purchasing bank owned, R.E.O. properties.  And we can tell you first hand that the market for this segment of homes in the Phoenix area is red hot right now.  Which leads me to the title of this blog post, "highest and best offer."  Now tell me if I'm wrong, but I didn't think the real estate market was a silent auction.  We get this response a lot these days from the R.E.O. listing agents.  Is this really in the best interest for all involved?  It seems to me that it would be in their client's (the bank) best interest if all offers were open to potential buyers, thereby ensuring the bank gets the most money for their property.  Instead buyer's will often just walk away and find another property.  Quite possibly if the buyers knew what they were up against they might make a higher offer. The bank would then net more from the sale.  Seems to make sense to me. Or am I missing something?

I know if I'm a listing agent for a normal client (not a bank) and we had multiple offers on their property my client would most likely want me to tell the buyer's agents where they stand in order to create a bidding war and reap more money.  Why would a bank be any different?

Can someone explain this absurdity to me?

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Anonymous #13
Anonymous
John Williams

As neither an auctioneer nor a real estate agent, but an economist and real estate buyer, it seems to me that a seller would generally get the best deal from an auction.  Everyone understands what this is and the process is totally transparent.  If buyers can trust the process, they are likely to be willing to bid more.  The "highest and best" process is opaque.  If a listing is at a certain price, a buyer has a hard time understanding why they don't necessarily get the property if they are the first to agree to the list price.  In no other transaction situation in the US (that I can think of) is this not the case.  Already, the buyer who has bid the asking price is feeling like he is getting hosed.  Then we hear, "present your highest and best" by a certain deadline.  But we are told this is not like dealing with a person, it is an institution, they have to meet, consider all offers, blah, blah, blah.  We don't know the deadline; we don't know the process.  This creates a situation which economists call "information assymetry."  This means that one side knows everything and leaves the other in the dark, like dealing with a hay-seed mechanic in a small town.  Well, buyers don't trust the sellers in these situations and are less likely to put their top dollar at risk.

March 31, 2010 08:55 PM
Anonymous #14
Anonymous
Randy

I placed a bid on a house and a week later the bank come back asking for highest and best. I added another three thousand to my offer and lost the house to a lower bidder. Why would the bank take a lesser offer on a property?

February 08, 2011 02:02 PM
Anonymous #15
Anonymous
jeff

I believe the highest and best scenario has been abused and so many investors go on to other houses when they hear those magical words. A property can sit for 6 months and if you make an offer, most times, you will get a call asking for highest and best.

Where may one find the legal guidelines for the administration of a highest and best offer scenario?

July 12, 2011 09:26 PM
Anonymous #16
Anonymous
Carol Castiglione

 

I am in agreement that this hardly seems ethical let alone legal. When the listing Broker has multiple offers, one is the highest, why doesn’t he present them to the bank and the bank choose one. It is fair to the person who had the highest offer to start bidding.

If you want to have bidders the banks need to auction the home.

Brokers are allowing the banks who do not have a broker’s license to dictate how to sell real estate. The brokers need to tell the bank you have financial licenses not a broker’s license and this is how it needs to be done.

I am so tired of this I want to call the Department of Professional Regulations and find out what is legal.

 

 

December 28, 2011 08:52 AM
Anonymous #17
Anonymous
Jerry Murphy

I hear you Carol.  The problem is the listing agents/brokers are too scared of the banks to stand up to them and tell them that what they are doing is wrong and is an ethics violation.  The agents are afraid of losing their account.  Because they know the bank can find some other schmuck that will do their dirty work.  What needs to be done is that we as the buyer agents need to report these listing agents to our respective governing boards.  The agents can say all they want about their fiduciary responsibility to their clients, but fiduciary responsibility does not include acting unethically.  Thanks for the response.

December 28, 2011 09:17 AM
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