Best and highest offer.

In the diverse world of real estate, transactions can often become aggressive, specifically in desirable markets. This is so common that I see this regularly.

The term “best and highest offer” is a common phrase used to describe the procedure in which sellers request that involved buyers submit their most attractive bids. This technique helps streamline the choices for the sellers and encourages prospective buyers to post their most competitive offers.

But there are differences in an average offer and the best offer and I’ll make it easier for you to see them.

Understanding the Best and Highest Offer

The best and highest offer is not solely determined by the purchase price. Although the financial aspect is attractive, other elements could influence the decision-making. These elements could include the following:

  • Terms provided
  • Contingencies
  • Financing
  • Buyer’s flexibility with the closing dates

 

Many sellers that I have worked with claim that these factors can massively influence their decision to go with a particular buyer.

One of the sellers we worked with decided to accept an offer that wasn’t offering the closest to the asking price, but had the best terms and contingencies. So if you think about it the best and highest offer depends on what the seller is looking for in the transaction.

Components of A Best and Highest Offer

Components of a best and highest offer.

1) Purchase Price

The purchase price is the amount the buyer is inclined to pay for the property. In aggressive markets, buyers might also offer above the listing fee to stand out. However, the highest bid won’t always be the triumphing one if it is not observed through favorable terms.

2) Earnest Money Deposit

This is a deposit made by the seller to demonstrate their motive to buy the asset. A large earnest money deposit can make a proposal more appealing to sellers as it suggests the buyer’s dedication.

3) Contingencies

Contingencies are situations that should be met for the sale to proceed. Common contingencies include home inspections, appraisals, and financing approvals. Fewer contingencies typically make an offer more attractive, as they lessen the danger of the sale falling through.

4) Closing Date

The proposed closing date can be a deciding element for sellers. A flexible buyer who can accommodate the seller’s desired timeline can also have an advantage, especially if the seller wishes to sell their house fast.

5) Waiving Contingencies

In competitive markets, some buyers may additionally pick to waive certain contingencies, together with the inspection or appraisal contingency. While this will make the proposal extra attractive, it additionally increases the risk for the buyer.

6) Personal Letters or Escalation Clauses

Some buyers include private letters to appeal to the seller on a personal degree. Additionally, escalation clauses, which automatically increase the offer if a competing bid comes in, may be used to maintain competition without exceeding a maximum budget.

The Seller's Perspective

Seller's perspective is different.

For sellers, the best and highest offer is a strategic opportunity to maximize the sale and secure favorable terms. Sellers generally request the best and highest offers once they have acquired multiple offers or anticipate doing so. This technique allows them to evaluate all offers and pick out the one that meets their financial and overall needs.

For example, a cash offer might be extra attractive because it gets rid of the uncertainty related to mortgage approvals. Additionally, a buyer with a strong economic profile and a generous downpayment is regularly seen as a more secure preference.

The Buyer's Strategy

From the buyer’s perspective, crafting the best and highest offer requires a balance of competitiveness and prudence. While it can be tempting to offer an excessive offer, buyers ought to consider the asset’s market value and budget constraints. Overpaying can result in headaches with financing, particularly if the asset’s appraisal does not match the offered price.

The Role of Real Estate Agents

Real estate agents play a vital role in guiding both buyers and sellers when it comes to the best and highest offer. For sellers, real estate agents help to set sensible expectations and strategize on a way to entice the most favorable offers. They help in comparing the unique aspects of every offer, considering both the economic and logistical factors.

For buyers, agents provide worthwhile advice on a way to shape their offer to be aggressive. They examine the marketplace conditions, similar sales, and the seller’s choices to tailor the offer. Agents also help buyers apprehend the risks related to waiving contingencies and provide advice on the way to navigate financing alternatives.

Ethical Considerations

The best and highest offer while powerful, can raise ethical considerations. Sellers must adhere to fair housing laws and should not discriminate based on race, faith, sex, or other social factors.

Buyers, on their end, should avoid making offers they cannot honor. Inflated offers that are contingent on unrealistic financing or appraisal values can result in failed transactions, wasting time and assets for all parties involved.

Conclusion

The best and highest offer in real estate is a dynamic method that allows the sellers to get the optimum deal and buyers to stand out and increase their chances of a successful transaction. Over recent years, real estate deals have become harder and it has been a seller’s market. Buyers have been dealt the tight end of the rope as markets continue to be aggressive.

In my professional experience, tailoring the offer realistically to match the seller’s needs is what makes it the best and highest offer.