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:
- What constitutes the highest offer?
- 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
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