Sooner or later if you are making offers on Bank Owned property you are going to hear the words “Highest and Best”.
Highest and Best is code for “the seller has another offer on the table and now they want you to compete, to see who is willing to pay the most”. What you do next depends on how much you want the house and why.
If you are an investor and you are in business to make money, you should already have calculated how much you are willing to pay for the property. Now is the time to make an offer at that figure, and you should not budge from it. At this time there is so much property around that you should not go above your predetermined parameters.
If you are not succeeding in buying it is generally because you are not making enough offers, not because the offers are to low. If you are making offers and getting no counters, then probably is because you are bidding too low too early, and the seller is not ready to deal.
If you are an “end user” your choice is more difficult. If you are a first time buyer, and already making huge compromises so you can get in the market, you are probably competing with the investors, and they are likely counting every penny. Also there is a lot of first time buyer property around, so don’t go crazy.
If however you are looking at a second or replacement home and you think you’ve found a steal, then you are probably right, particularly if the property is new on the market or they just reduced the price, or particularly if it’s been off the market and was just restored. If you really want the home you may need to consider an offer at the asking price or maybe a tick above it.
So here’s how it works. First a little recap on the basic negotiating process. The basic details of your initial offer is keyed into a website by one of the agents involved in the transaction. After a period of time which is generally 24 – 48 hours, the banks agent (asset manager) reviews your offer and if you are close enough to be taken seriously, sends back a counter offer. There is ALWAYS a counter offer, which legally takes your offer off the table and removes any and all liability you might have
The counter offer ALWAYS consists of a bank addendum which becomes part of the state contract you originally signed. They may change the terms and conditions, in which case it is a genuine counter, or they may simply restate them. In any case you have at least 48 hours (often more) in which to review the mound of paperwork they send you and return it to them.
Once the contract package is returned, it then goes to “management” to be reviewed and signed off, which again might take another 48 hours.
If you add up all the time you can see that a week can easily go by from your initial offer to an executed contract. If at any point during this process another offer comes in, whether or not it is better than yours, the bank has the option to stop and call for “Highest and Best”. They usually give a deadline of about another 48 hours, for everyone to give it their best shot.
Once the deadline is passed they will consider all the offers, and then make a counter to the one they consider their best. If it’s not yours then you wait for a while, if they can’t work it out with number one they might come back to yours. You also need to understand their preference, because they may not take the highest dollar offer.
These are their preferences.
1 All cash no contingencies, for inspection or anything.
2 Cash plus hard equity, with no contingencies.
3 Cash and Hard Equity with right to inspect.
4 Low Loan to Value conventional , right to inspect, no cash back.
5 High Loan to Value conventional, right to inspect, no cash back
6 High Loan to Value conventional, right to inspect, cash back at closing
7 High Loan to Value FHA/VA, right to inspect no cash back.
8 High Loan to Value FHA/VA, right to inspect, cash back, down payment assistance.
You can probably figure out that they are more interested in the probability of the property actually closing that how much cash they will clear, although that is also a factor.
In summary Highest and Best means you are competing with at least one other buyer, so the seller is holding most of the cards. Make your best offer and wait with fingers crossed. If you don’t get that one there are plenty more fish in the sea.
No comments:
Post a Comment