You’ve been checking Zillow and Realtor.com obsessively for months looking for the perfect home in the perfect neighborhood to no avail. But then the day finally arrives and THE ONE has just been listed! You drop everything and call your agent in a rush to be the first to put in an offer. Before you even get the chance to do so, the selling agent demands that all offers be ‘highest and best’ and received no later than 10pm that evening. What exactly does that mean?
We are currently in one of the greatest sellers markets in history. A highly used seller strategy is to demand that all offers be ‘highest and best’ and provided within a short time frame.
The seller’s goal is to obtain the highest price within the least amount of time. The ‘highest and best’ strategy aims to do just that. In a multiple offer situation, the seller is using the tactic to weed out weak offers and eliminate needless back and forth negotiation. Most often, buyers provide an initial offer that is below what they are ultimately willing to pay. By demanding the ‘highest’ offer, the buyer is pushed to offer the maximum amount they are willing to pay for the property, while ‘best’ refers to all other aspects of the contract including waiving financing, inspection or appraisal contingencies, closing and possession date flexibility, the amount of cash down or earnest money, and payment of closing costs.
The highest price is not always the best offer for the seller. For example, a cash buyer offering $245,000 with no contingencies and a 14 day closing may be more attractive than a buyer offering $260,000 but with financing and inspection contingencies with a 60 day closing. Accepting the highest offer means nothing but wasted time if it doesn’t make it to the closing table.
In such a competitive sellers market, what should buyers be doing to get prepared and be in position to quickly, and rationally, make their offer and have it selected?
I highly recommend that you sit down with your agent (before you begin your search) to go over the terms of the standard purchase contract and to discuss what you may be able to do to strengthen an offer in such a situation. These are not the sort of decisions that you want to be in a rush to make after you find your dream home. I can assure you that there are others already prepared and ready to pounce.
