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Highest & Best Offer: What's Your Risk Tolerance?

By Charita Cadenhead

Real Estate Agent with eXp Realty

November 14, 2011 01:32 AM

Highest & Best Offer: What's Your Risk Tolerance?

The term highest and best offer usually refers to a muliple offer situation on a particular home. It simply means that the seller has multiple offers and if you really want the home, you'd better come with your best offer.

Now "highest" and best is a bit of a misnomer, because people almost always think that the highest price is the charm. But what about the "best" terms accompanied by a lower offer price? Don't dismiss the value of "terms."

Don't need help with closing cost? That's an attractive term if I ever heard of one.
Paying cash and can close in 2 weeks? Great, the seller's in a hurry.
You don't need no stinkin' home inspection? That ought to bring a smile to the seller's face and speed the process up a tad.
What's that you say? You'll give the seller up to 5 days after closing to move out? Music to the seller's ears. There's nothing like moving in a rush and forgetting important details.

But what about that "highest" thing? I definitely can come into play so here are some things to consider:

How badly do you really want that house?
Is is worth quibbling over what amounts to a few hundred dollars and risk not getting the home?
Is it about winning or is it about getting the house that you really want?
Do I (the Realtor) think that there are any other offers? The truth is that we never have anyway of knowing whether there are other offers or not.
Don't get caught up in the frenzy though and overbid. In other words, don't write a check that your..............well you know the rest.

Bottom line is this: when it comes to highest and best offers and the fact that you really want the home, your offer should reflect your level of motivation. Your Realtor® can review comps with your, recommend a strategy and a range of offer prices, but ultimately whatever we put on paper, is whay YOU have decided.

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Brenda Mullen

RE/MAX Associates - San Antonio, TX

Your San Antonio TX Real Estate Agent!!

Such an informative post Charita. There are several things that can make an offer more attractive and it isn't always just the price. Best price with the best terms will generally win out! Suggested my dear :)!

Nov 14, 2011 01:49 AM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

Brenda in the famous words of Barbara Todaro, it can be a "crapshoot." Thanks.

Nov 14, 2011 02:00 AM

Jennifer Prestwich

Henderson, Thornton, Broomfield and Westminster - Henderson, CO

Madison & Co Properties

GREAT post, Charita. Whenever I have a multiple offer situation, I urge my seller clients to really look at what is being offered or asked for. With buyers, I definitely make sure they understand what they are offering- and that it is something they can stomach- or afford!

Nov 14, 2011 02:35 AM

John McCormack, CRS

Albuquerque Homes Realty - Albuquerque, NM

Honesty, Integrity, Results, Experienced. HIRE Me!

Hi Charita -

I seem to be dealing more and more with highest and best. My buyer wants to make an offer, I call the listing agent to make sure the house is still active etc and they say we have another offer or to save time let me say the offer needs to be highest and best. I get exactly what they're telling me and convey the information to my buyers. Sometimes it works sometimes it doesn't and we move on. I like your statement to Brenda using the word " crapshoot". Make it a great day in Birmingham!

Nov 14, 2011 02:36 AM

Christine Smith

Buyers Brokers Only LLC - www.BuyersBrokersOnly.com - Canton, MA

Exclusive Buyer Agent & Attorney, Canton, MA

Charita....another excellent post. Sometimes my buyers cannot go higher but can add in better terms. Other time they think they may be at their highest but when push comes to shove, they will go a little higher to get it.

Nov 14, 2011 04:40 AM

Dr. Paula McDonald

Beam & Branch Realty - Granbury, TX

Granbury, TX 936-203-0279

Oh there are so many ways to skin a cat (structure an offer)! Sometimes we all have to use a bit of flexibility and creativity to make it happen.

Nov 14, 2011 05:10 AM

Kathy Clulow

Uxbridge, ON

Trusted For Experience - Respected For Results

Charita - when presenting or receiving an offer one always need to look at the whole picture ..... it is amazing how many blow what could have been a good deal by simply looking at the numbers and saying no.

Nov 14, 2011 06:13 AM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

Jennifer you and I both know that overzealous can sometimes override common sense, so buyers need that little nudge to keep things in perspective.

John a crapshoot is exactly what it is. It's a risk people take not knowing which way the wind will blow.

Christine many times it's about that personal comfort zone and other times, it's about that gut feeling. Either way, decisons have to be made and in may cases, I'm glad I'm not the one who has to make the decision.

Paula the posibilities are endless but oftentimes you'll see the same tired negotiations lacking creativity and not trying to buck the norm.

Exactly Kathy. They hone in on that number as if it's the only thing to consider and then when the number is "accepted" they began to look at other terms that had been overlooked because everyone was so focused on price.

Nov 14, 2011 07:17 AM

Cathy Criado

Criado Realty - San Antonio, TX

Making Real Estate Profitable

Charita, that's right, BEST is best. When I present offers I do a summary on a net income analysis, but I have a side bar with a list of other items. It comes in pretty handy when considering 2+ offers.

They see the bottom line AND the OTHER FACTORS.

Love the blog.

Nov 16, 2011 03:31 AM

Gita Bantwal

RE/MAX Centre Realtors - Warwick, PA

REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Charita, it is important for buyers to work witha good buyer's agent who can help them make an offer that the sellers will accept. Great advice for buyers!

Nov 16, 2011 09:44 AM

Rebecca Gaujot, Realtor®

Lewisburg, WV

Lewisburg WV, the go to agent for all real estate

Charita, great post and advice for ALL the buyers !!

Nov 16, 2011 09:56 AM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

Exactly Cathy. The question also becomes: how serious is the buyer? Do they just want to play games or the big negotiator or do they really want the house enough not to quibble over pennies.

Gita you're right, because without guidance and discussion of comps, many buyers just don't know where that number comes from.

Thanks Rebecca.

Nov 16, 2011 10:56 AM

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