Highest and Best Offers
What is a highest and best offer?
When a seller receives multiple offers on their property, usually they will ask all interested buyers to submit a final offer by a certain time and date. The idea is that this is the highest amount the buyer is willing to pay with the best terms possible. Usually, there is no additional negotiation other than perhaps asking the buyer to change a closing date. So, interested buyers should offer the maximum amount of money and most attractive terms they are willing to offer for the property.
How do you put together the highest and best offer?
There is a lot more than just purchase price in a highest and best offer. Here are some other items you need to consider when putting together this offer as well as strategies to help you win in a highest and best offer situation:
Get your real estate team (your REALTOR® and lender) on the same page to ensure a smooth transaction, particularly your lender. You don’t want to find out that you can’t qualify for the amount of money you’re offering if you go above the list price.
Mortgage pre-approval (if applicable): if you’re using a mortgage, make sure you have an up-to-date pre-approval that is submitted with your offer. Also, you need to be comfortable with the offer you’re putting in and the monthly payment associated with that price.
Flexibility: if possible, try to have a short closing day (30 days with a mortgage and 21 days with cash) unless the sellers have a specific closing date in mind and limit your contingencies (ie: if you have a house to sell prior to this purchase). The cleaner the offer, the higher your chance of having your offer accepted. If the seller has a specific closing date and desires possession after closing, try your best to accommodate.
Don’t be too picky: sellers want to work with an easy buyer. Talk with your REALTOR® and come up with reasonable requests. For instance, we don’t suggest asking for a home warranty if you’re in a multiple offer situation.
Consider an As-Is offer: an As-Is offer means you do an inspection, but won’t ask the sellers to make any repairs. You are agreeing to buy the property As-Is. After the inspection you can still choose to walk away if you aren’t comfortable with the inspection results, but you won’t ask the sellers to fix anything if you choose to move forward with the purchase.
Have your lender call the seller’s REALTOR® and assure them that you are a strong buyer and won’t have any issues qualifying for the loan.
Write a seller love letter telling the seller about yourself and why this is the perfect home for you.
Consider a price escalation addendum. In most cases in the current market, sellers will not accept an escalation addendum and would prefer just a price. However, if they are accepted, they can be useful.
Why do sellers ask for the highest and best offer?
It gives all bidders an equal opportunity to view the home and have their offer considered. It also shows how committed a buyer really is.