Expert: Toni Yates - 1/6/2009

Question
I live in the state of Virginia and I am trying to buy a foreclosure the bank came back with they wanted "highest and best" offers. My realtor pulled the comps for the area for the last 90 days and I have submitted another offer for the property based on this offer. My question is it legal for the bank not to tell prospective buyers what the counter offer is? Or is it common practice for buyers just to blindly pay more. I also understand its not a counter offer however how can I find out if not relaying the highest bid information to prospective buyers is legal or not. Basically I need to ease my spouses mind by showing him in black and white that this practice is legal. Additionally, I do know about the appraisal process I will be using a VA home loan. But my husband being a panicky and conspriatorist type doesn’t think the bank should be allowed to do this and believes I shouldn't have business dealings with them.

Answer
Hi Tess-
Thanks for your question. Here's the deal- the bank (in the case of a foreclosure) has already paid for the property so they are out the money plus the cost of foreclosure (estimated at $60-80,000 per house). Obviously, they want to get the best price to help offset their losses. It sounds to me that there may be multiple offers and they are giving all bidders an opportunity to make their best offer after which they will accept the one most beneficial to them. I'm no fan of the banks right now but I fail to see how this would be construed as illegal as they are giving everyone the same opportunity and not playing one against the other as in "can you top this?" (which they would be doing if they countered each one). In addition, most banks are so overwhelmed that they are looking for the easiest and best solution. If you want the house, play it through and see what happens. Best case you'll get it at a fair or better-than-fair price- worst case you'll get your earnest money back. Otherwise, there are other good deals out there. Hope this helps. Best, Toni