I posted yesterday the details of our latest property negotiations. As I mentioned, we had made an offer, the bank countered our offer, and we had just submitted a second counter-offer to the bank…
This morning, the bank responded by requesting our “highest and best” offer. This essentially means that the bank doesn’t particularly want to go back-and-forth any longer, and they now want us to come forward with our best offer, so that they may accept or reject it. This is a common tactic these days for REO sellers; it’s generally used when there are multiple buyers offering on the same property (this allows the bank to see everyone’s best offer at the same time), but we occasionally get asked for highest and best even when we’re the only potential buyer.
My strategy for highest and best usually depends on whether I think I’m bidding against other buyers or whether I think I’m the only bidder. If I think there are other bidders, I’ll put in my absolute best offer, as I know there is unlikely to be another negotiating round. But, when I believe I’m the only bidder, I’ll often keep my highest and best a bit lower than my real best offer. I do this for two reasons:
- If the bank accepts the offer, I just received a discount;
- If the bank doesn’t accept the offer, there is still an opportunity to continue negotiations (since there are no other potential buyers).
As I mentioned yesterday, our last counter-offer was $42K, 3 days of due diligence and $2K in earnest money.
When she asked for our highest and best, the listing agent let us know that the bank was looking for an offer near $50K. We let her know that that was unlikely (we reiterated the flood area as well as the long time on the market), but that we’d get back to her with our best offer.
My highest purchase price is probably around $44-45K, and I really don’t care about due diligence (I’m happy with none) or earnest money (I’ll put down as much as the seller wants). Since I’m happy to concede anything around due diligence and earnest money, the only variable I’m now concerned with is purchase price.
So, to leave myself a little room to negotiate later (if the bank rejects my highest and best), I submitted an offer of $43K today. I asked for no due diligence period and offered $5K in earnest money.
I guess we’ll see if they accept it, reject it, or counter-offer on it…