The Bank Wants Your "Highest and Best"

We've all been there.

You have finally found that perfect property, and despite it being at the upper end of the acceptable price range, you go for it. You're all in, short contingency period, 20% down, 30 day escrow and a full price offer.

Then you are excited to see the listing agent's phone number come up on your caller ID. "REO broker's don't bother to call everyone back, your offer must be receiving serious consideration" you tell yourself as you mentally prepare to subdue your jubilation of potentially closing on this property.

Then you hear "Hi Jake, we've received your offer on 24 Avocado Ln, we would like you to submit your highest and best offer. This is a multiple counters situation."

Crap.

All of the hard work you go through to find your client this property is now for naught because some idiot is going to overpay for it. Or maybe it is just you, and the multiple offers are bogus? OK, OK, let's raise our offer by 10% just to make sure we get it.

Whoops. That's exactly what the bank WANTED you to do! The "Highest and Best" tactic is a perfect example of why you should decide what the top number you're willing to pay for a property is BEFORE ever making an offer. That way, no matter what tactics are used in the negotiation, you will never go over that number. It's kind of like setting a pre-determined limit when gambling. So, decide what your ceiling is, and either offer that initially, or be willing to go up to but not over it, and you'll never have to worry about the "highest and best" trick again.

-Jake

The Real Estate Investor/Agent Manifesto

Over time, one sees that there is much of an opportunity for friction as there is for synergy amongst real estate investors and real estate agents. I'd like to share my thoughts on the matter below, with regard to the responsibilities of each party.

Investor Responsibilities

1) Define your criteria. Are you a buy and hold guy? Are you a flip guy? Both? What's your budget? Are you cash or financed? Are there any areas you won't touch? Are there areas you'll pay a premium for?

2) If I send you a property, and you don't like it, tell me why. I wouldn't have sent it to you if I didn't think it would be a good fit, so just telling me "pass" isn't constructive. Telling me precisely what about it you don't like will help me avoid properties like that in the future, and save both of us time.

3) Be able to close. Whether you are cash or financed, bailing on an escrow is going to suck for everyone. If you legitimately get new info during inspections and want to back out, that's totally acceptable. But if you just want to back out because you got cold feet or you couldn't find the money in time, that's not really a good use of anyone's time.

Agent Responsibilities:

1) Be discerning. A 4 bedroom SFR is not a 3 bedroom townhome no matter how much you want it to be. Nor is a neighborhood necessarily similar to surrounding areas. Don't twist an investors desires to meet current market inventory.

2) Be innovative. Anybody can access the MLS, but calling canceled listings, withdrawns, expireds, and sourcing pocket listings in your own ways are vital to finding deals ripe for the picking. Having good relationships with REO brokers helps here too.

3) Understand your client's schedule and motivations. If he can't be there to see the property and you think it will go quickly, then YOU be there and bring a video camera.

4) Don't make your client wait on you, but don't flood him with information either. Be in touch with your client precisely as often as he wants to hear from you, but not more than that.

5) Don't forget that women invest in real estate too. Using solely male pronouns in a list of responsibilities is a surefire way to piss a lot of female investors off. Whoops...