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Highest Ain't Always Best

By
Real Estate Agent with eXp Realty

Let's just get this out of the way:  Yes, I said "ain't."  Ok now on with my post. With so much buyer competition, there is really no need to call for highest and best offers since the volume of sellers' offers on hand may already be sufficient. They can choose from the offers they already have. Furthermore, when a seller has lots of offers, from what I've seen, there isn't much difference that a new offer can put on the table compared to the offers the seller already has. I tend to think that if agents are calling for highest and best then the seller probably doesn't have many offers or any that they want to seriously consider.

So, What Constitutes Highest and Best?

As I think about it, that question should really be broken down into 2 questions: 

  1. What constitutes the highest offer?
  2. What constitutes the best offer?

Ok so the highest offer may speak for itself. However, the best offer isn't necessarily the one with the highest price. Let's review some of the scenarios in no particular order (well except for #1).

Best Scenario #1

Cash is and has always been king. Not having to deal with lender conditions and appraisals make them attractive even when the offer price isn't the highest. Cash offers can usually close far more quickly than a financed transaction. For the purpose of this post, let's consider that the remaining scenarios are financed offers.

Best Scenario #2

This is a situation where the combination of price and terms are attractive. Many buyers and their agents are so focused on price that they forget about the importance of attractive terms. The best terms contain no contingencies (inspections, financing, repair negotiations, etc). The fewer contingencies, the better for the seller and hopefully it works out to be better for the buyer as well.

Best Scenario #3

Let me just revisit the highest price for a minute. Sometimes sellers just can't get past the fact that the highest price does not necessarily translate into the best offer. When comparing the net sheets of various offers, sellers will often go with the highest price even when the net of an offer with favorable price and terms will give them the same net. This is one of those situations where sellers may want to be able to say that they sold their house for $$$$. It makes them feel good, but boy oh boy what they have to go through as it relates to the not so ideal terms attached to that highest offer.  

Best Scenario #4

What if the seller needs some extra time to move out of the house? Moving out on or before the closing date may not be feasible for the seller. They may need an extra 1, 2 or sometimes even 3 or more weeks. The buyer that offers this option is likely to rank high on the list of attractive offers.  Buyers should be careful with this one and consider that damage that the seller may cause moving out or what if they take items that the contract calls for them to leave. Contracts should cover "what if" contract clauses for cases such as this.

Best Scenario #5

No seller contribution to buyer's closing cost. Anytime the seller gets to keep more money in their pockets, given all other acceptable conditions, they'll go for it.

Best Scenario #6

Whether it's price, terms or a combination of both, the best offer can come when the buyer's side isn't serving up a buffet of attitude and frustrations before serious discussion/negotiations even begin. Many sellers will walk away from that headache quick, fast and in a hurry. If a seller is catching flak from the buyer's side early on, they may feel that it's not even worth it to deal with such foolishness. The fact that the buyer may have the highest ($) offer could turn out to be inconsequential. I eluded to this in my post about 10 acres of land that my seller recently sold.

Higest and Best are not Synonymous 

Regardless of whether an agent is working with a buyer or seller, they need to discuss what highest and best really means. 

I can go on for days, but you get my drift. The highest and best isn't always cut and dry. The buyer with an agent that realizes and conveys this is the buyer that has the greatest chance of getting an offer accepted.

Let's not forget that we are not seeing a lot of calls for highest and best these days so the buyer's best bet may very well be to come to the table with his/her highest and best right from the jump.

So much to consider. So little time.

Photo by Cytonn Photography on Unsplash 

Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Charita,

I agree with Michael Jacobs ain't is often appropriate when attempting to make a point. You are right highest and best are not cut and dry. The best offer price many not be best deal for the sellers...maybe the time to close or others requests aren't acceptable. 

 

Dec 17, 2023 07:08 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

You are absolutely right. Highest and Best are not necessarily the same!

Dec 17, 2023 08:10 AM
John Pusa
Glendale, CA

Hello Charita Cadenhead you are right, highest ain't always the best.

Dec 17, 2023 10:18 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Charita, I know after listing lots of homes, the highest price isn't always what is chosen, it can be terms for the sellers.

Dec 17, 2023 12:06 PM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

As a Buyer Agent , I’m always looking for a Sweetener or Bone I can toss the Sellers ( that really doesn’t affect my Buyers financially )

Dec 17, 2023 12:58 PM
Kathy Streib
Cypress, TX
Home Stager/Redesign

Hi Charita- I also agree with Michael Jacobs "ain't" made the point in a way "isn't" couldn't!!! And your point is spot on. You cannot look solely at the dollar amount of the offer!  Too many other factors enter into the "best" offer. 

Dec 17, 2023 08:04 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker
Great information, thanks for sharing.  I hope you have a great day.
Dec 18, 2023 03:01 AM
Charita Cadenhead
eXp Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Thanks everyone.

Dec 18, 2023 04:05 AM
Debe Maxwell, CRS
Savvy + Company (704) 491-3310 - Charlotte, NC
The RIGHT CHARLOTTE REALTOR!

Hi Charita! You're so right - one doesn't necessarily equal the other! As you mentioned, it's always wise to review exactly what this is with our clients. For sellers, I request permission to share what their top 3 points are in a 'best' Offer.

Oftentimes they include highest (price) as one of those 3 most important components but, by the time our conversation has ended, they know how they want to handle multiple Offers! 

Great post and all excellent points.

Dec 18, 2023 09:32 PM
Charita Cadenhead

Debe I can’t say that I’ve ever shared the seller’s top considerations with the buyer side when offers are being submitted.  However, during multiple offers, the sellers will usually narrow the choices down to the top choices and then during negotiation process, those priorities become clear.  You and  may do the same thing but at different times.

Dec 24, 2023 08:22 AM
Kathy Streib
Cypress, TX
Home Stager/Redesign

Dec 23, 2023 07:21 PM
Charita Cadenhead

Kathy Streib fantastic.  Thank you

Dec 23, 2023 07:50 PM
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

HI Charita Cadenhead - "Ain't" was important to note.  I like the way Kathy Streib explained it.  Everyone made great points.  I have had many listings and my sellers always scrutinized these offers.  No quick decision has ever been made. As others have  stated, the highest offer is not always the one that has been chosen.  

Here is where I might differ.  When there are multiple offers for my sellers,  I always inform those who made an offer that there are other offers being considered.  This gives the potential buyer an opportunity to revise their offer.  This is strictly up to the individual.  

I do think that most agents would agree that the seller will always choose the "Best" offer that works for them.  If it is also the "Highest" offer, that is just the icing on the cake and many sellers want that icing! Haha - But to your point, not all think it is the most important aspect of selling their home. Merry Christmas Eve!

Dec 24, 2023 07:49 AM
Charita Cadenhead

Sherry there are so many facets that a seller has to consider. And yes, obviously the offer they choose is the best for them whether it is the highest dollar offer or not.

As for where we might differ, I don’t think we differ at all. I had to read back over my post to find where I said the buyer was not informed about other offers, but I didn’t see that. But on that note, notifying buyers that there are other offers, in my opinion, is not the same as calling highest and best.

It’s  been my experience that before buyers make an offer, their agent will usually ask if there are other offers on the table in which case I only respond with ”yes” if there are offers on the table. A direct question deserves an honest answer. This gives the buyer the same opportunity that you give them, so you see we might use different terminology, but we don’t differ at all.

Thanks for sharing your perspective.

Dec 24, 2023 08:14 AM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate Services

Well said Charita Cadenhead The highest and best are not synonyms.  There are so many other factors that must be taken into consideration. You have illustrated many here in this post! 

Dec 24, 2023 08:13 AM
Wanda Kubat-Nerdin - Wanda Can!
Red Rock Real Estate (435) 632-9374 - St. George, UT
St. George Utah Area Residential Sales Agent

You have effectively covered the importance of making a good offer that a seller would be interested in considering, Charita. I ain't lying! Highest and best should be submitted upfront rather than the buyer possibly not having the chance to adjust the offer due to multiple offers.

Dec 24, 2023 08:33 AM
Charita Cadenhead
eXp Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

My point exactly Wanda.  When there are existing offers and I get inquiries about possible offer. I suggest that ther buyer bring their best offer upfront.  

Dec 24, 2023 08:37 AM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Every offer needs to stand on its own and price is not the only consideration. In the current market, asking if there is anything else on the table is a sure way to get rejected as it conjures up a bargain hunter.

Dec 24, 2023 10:08 AM
Charita Cadenhead
eXp Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

You’re right Ed.  Every offer stands on its own.  Each may have similarities but because it’s about what’s negotiated that makes the difference.  What’s important to one seller may not be important to another.

Dec 24, 2023 10:14 AM
Leanne Smith
Dirt Road Real Estate - Golden Valley, AZ
The Grit and Gratitude Agent

Effective decision making is a process of assessing all options, clarifying those options and then executive the best decision. Your examples are a great illustration when it comes to highest and best.

Dec 26, 2023 05:30 AM
Charita Cadenhead

Leanne Smith decisions, decisions, decisions.  They have to be weighed and made.

Dec 26, 2023 02:27 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

I so appreciate your post.  My closing tomorrow is not the highest price, but it is cash and closing is in a 2 week timeframe.   Great post to remind people to look at all aspects of an offer!

Dec 26, 2023 12:05 PM
Charita Cadenhead
eXp Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)
Jan, cash continues to be king. The downside to that is that owner occupant buyers continue to be squeezed out by cash offers. But this confirms that highest ain’t always best.
Dec 26, 2023 02:25 PM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi Charita:

You are so right, highest does not necessarily equal best. There are so many factors for sellers to consider and it often depends on what is important to them...closing date, need for a rent back, net proceeds for example. Laying all the offer terms and conditions out in a spreadsheet to review with sellers can be a good way to evaluate and compare them.

Jeff

Dec 29, 2023 11:07 AM
Charita Cadenhead

No doubt it's a balancing act Jeff. Anticipating offers beforehand can help to lighten the burden of making a tough decision.  After all, both buyers and sellers should be anticipating the actions of the other party.

Dec 29, 2023 11:13 AM