How To Handle Highest and Best Counters

The highest and best counter is the dread of many real estate investors. Well, not really dread, but it certainly is unpleasant. It serves as a reminder of why it's better to find a deal off-market than on the MLS. That being said, we've had a lot of success buying off the MLS by simply making lots and lots and lots of offers. So dealing with highest and best situations is something we've become quite accustomed too. 

The first thing is simply to know where you're at and what your appetite is. Do you have a lot of money or investor funds to place? If so, it would be good to be a bit more aggressive. But if you're a little tight, don't push on the deal. Just because it has gone highest and best doesn't mean the other offer is strong. Sometimes it's an offer that had been made on the property a long time ago that amounts to little more than a low ball. The seller uses that as leverage to get you to raise your price. And sometimes, even if you're the highest, they will counter you again because they don't think you've gone high enough. Fannie Mae does this a lot (amongst other very annoying things they love to do). 

If you are wholesaling or flipping without doing a rehab, you should be very cognizant of any deed restrictions or earnest money problems. Fannie Mae and Freddie Mac require 10% down for cash purchases. Furthermore, you can only sell it for 20% more than you bought it for. This puts you at a lot of risk because you are not going to get your earnest money back if you back out after the inspection period.

So other than those factors, the key thing to ask is "at what price will this be a really good deal?" And that is the price you should come in at. You will usually lose out, but not always. Indeed, Fannie, Freddie and HUD or notorious for miss listing properties now and then, and everyone bidding on them still wants a deal. Sometimes you will be able to get it.

Just don't do what happens in auction situations sometimes, where people bid way above their strike price because they get caught up with the idea of winning. Stick to your strike price and you'll be fine.