In the last eighteen months trying to pick up a "deal" has made all home buyers explore the world of purchasing a bank owned foreclosure. While there are opportunities to be found, most conventional buyers are not prepared for the process. I am writing a series of posts to discuss some of the issues commonly found that are not normally experienced when buying a home for sale by a non-corporate seller.
Due to either the increased amount of foreclosure, the predominance of bad information available from the late night shucksters, or just the honest desire to buy low, most multiple listing services are currently recording sales of bank home sales amounting to 30% to 60% of all sales! This is an incredible number! I remember a few years ago when a number of us thought the Indianapolis Board of Realtors should give REO Brokers a voice because our listings represented 25% of all sales. Today, the same board acknowledges this number is approximately 35%.
This high degree of interest in bank owned REO properties means most homes placed on the market end up receiving multiple offers. It may not be when they first are listed, but when the price is adjusted to market the offers fly in. When this occurs most banks automatically tell us to set aside all the offers received, and place a deadline on receipt from these same buyers for their "highest and best" (H&B) offer.
This request often starts a series of phone calls that cause buyers agents to feel frustrated with our lack of response. Most buyers want to know "where do I need to be with this H & B offer in order to get the house?" Incredibly, many Realtors actually believe that my company, the listing brokerage representing the sellers best interest, have a duty to speculate and provide this answer! In some cases, I do think the ethics part of their brain gets overruled by a desire to make their buyer happy and get an answer to this question.
We won't answer that question!
As I have coached all of our buyer agents, and buyers I have worked with through the years, you have to approach H & B accepting that the issue does not just involve price. Terms such as financing, inspection contingencies, time to close, and requested concessions, will all play into the entire fabric of what makes for the HIGHEST and BEST offer. So, STOP worrying about anybody but yourself! Try and take the emotion out of the process (I know it is easier said than done) and look at YOUR own situation.
Respond to a H & B request with the offer that you know you would not, or could not, go any higher in order to obtain this property. The offer that if you learn somebody else gets the property, and you learn the terms, you would not say "I would of made that offer"!
We are not going to jeopordize our seller's position by revealing the amount they need out of the transaction or any terms they will not accept. If we have terms to share they will be shared with all parties. As a buyer, don't ask your buyers agent to go on a hunt to find out information. It places them in a spot where they are forced to look foolish, or unethical. Your agent needs to help you find that sweet spot that truly allows you to sleep at night knowing you offered the most you would for this property.
If the game of Highest and Best is not one you like the sounds of, then buying bank owned REO properties may not be right for you. Remember, out of these situations often arise the opportunity you are seeking. It is part of the ticket for admission.
Finally..this tip. Yes, often H & B situations end up with an over list price accepted offer. So, don't let the list price weigh too heavily in making your offer.
Other posts in the series "Are You Really Prepared To Buy A Bank-Owned (REO) Home?"
Wilmoth Home
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