Winning at 'Highest and Best'

In my market areas, there's a shortage of supply in the under $150,000 price range. That means that most first time buyers are getting into multiple bid situations.  As both a listing and a selling agent, here's what I've seen.

First, sometimes the list price is artifically low. Maybe it's a short sale and that's the only way the seller could generate enough showings. Maybe it's a bank owned with a listing agent from 30 miles away and they're not familiar enough with the local market to price it a little higher. Or maybe the bank just wants to get it sold fast.

What I'm driving at is that the list price is not always the 'fair' market value. Usually we see that on the other end of the spectrum - where it's too high.  I've also seen $89,000 properties sell for $102,000 and $107,000 homes sell for $121,000 - and pretty recently. And that means they did appraise, folks.

I always counsel my buyers that we need to be ready to move fast. Strong pre-approval is number one.

Also, be ready to scurry to get a bank specified pre-approval. Wells Fargo and Bank of America do this all the time, as do many other foreclosure (REO) vendors. Your buyer can still use their lender of choice, but they better have their info ready for a quick bank pre-approval from another lender.

If you can get your offer accepted quickly you can eliminate the multiple offer scenario. But that's happening less and less.  Many banks don't allow ANY offers for the for the first seven days of a listing. Then it's open only to owner occupants for the next week, then it opens to investors.

I also suggest that you forget about the list price.  Do what you're supposed to do - a CMA on the property. Sure, you take into consideration its condition and its defects, but you need to establish a real value 'as is'.  In some cases your buyer may elect to surpass even that amount. Maybe it's convenient to family or commuting needs. Perhaps it's the school district they really want their child to attend. Perhaps it's an REO property in (gasp!) move-in condition.

Paying a little over fair market value isn't that big of a deal when you're looking at amortizing a loan over 30 years and IF this is the property they want the most. We all get into this lowest price mindset and lose sight of the bigger picture.

Make the terms as painless as possible. Be prepared to eliminate seller concessions towards closing costs if necessary to make your 'highest & best' more attractive. I've seen banks take a lower priced but more streamlined terms offer after they call for highest & best.  That's not the norm, of course, but it does happen.

I do quite well for my buyers on price and terms. But if they constantly lose house after house to superior bids, not so much. We've all worked with buyers that exhibit 'selective memory'. We still have to start from the very first meeting to establish how they will be successful in buying a new home with the least amount of stress, and to fully explain market dynamics.  That's why they chose us instead of another agent.