What is a highest and best offer?
When a seller receives multiple offers on their property, they typically ask all interested buyers to submit a final offer by a certain time and date. The idea is that this is the highest amount the buyer is willing to pay with the best terms possible. Usually there is no additional negotiation other than perhaps asking the buyer to change a closing date so interested buyers should offer the maximum amount of money they are willing to pay for the property.
How do you put together the highest and best offer?
While you might think the seller just wants the highest price for their property, there are other considerations that factor into which offer is the best for them. Here are some of those considerations and strategies that can help you secure the home you want:
- Have your real estate team on the same page to ensure a smooth transaction. You don’t want to find out that you can’t qualify for the amount of money you’re offering if you go above the list price, so keep your lender in the loop as well as anyone else involved.
- If you need a mortgage, make sure you have an up-to-date pre-approval which should be submitted with your offer. Also, you need to be comfortable with the offer you’re putting in so ask your lender about the payment difference if you are increasing your offer.
- A typical closing timeframe for a loan would be around 45 days and 30 or less for cash purchases. Unless the sellers have a specific closing date in mind, try not to ask for anything out of the ordinary in terms of closing. Make sure your Realtor knows if the seller wants post-closing possession and add that to your offer to make it more attractive.
- Sellers want to work with a buyer who they think will be easy to work with. Talk with your Realtor and come up with reasonable requests. For instance, I don’t suggest asking for a home warranty if you’re in a multiple offer situation or closing costs if you don’t absolutely have to have those. The cleaner the offer, the better.
- Consider making an “As Is” offer. An “As Is” offer means you do an inspection, but won’t ask the sellers to make any repairs. You are agreeing to buy the property as it is. After the inspection you can still choose to walk away if major defects were revealed that were not previously disclosed, but you won’t ask the sellers to fix anything if you choose to move forward with the purchase. This gives the seller peace of mind that the deal will likely close because, often times, if a deal falls apart it’s over inspection items. This isn’t the best choice for all buyers.
- Have your lender call the seller’s Realtor and assure them that you are a strong buyer and won’t have any issues qualifying for the loan.
- Write a seller love letter telling the seller about yourself and why this is the perfect home for you.
- Consider an escalation clause. This is something I go over with all my buyers who are in multiple offer situations and it is often used in our market. I have specific strategies when using this clause.
- Additionally, when I have a cash buyer in a multiple offer situation there are some strategies to help make their offer the most appealing beyond the fact that there will not be a financing contingency.
Why do sellers ask for highest and best offers?
It gives all interested parties an equal opportunity to have their offers considered and it shows how committed a buyer really is. Plus, sellers want the most they can get for their home with the best terms and this gives sellers that opportunity. Some sellers list low with the hope they will get multiple offers so they secure a fairly clean offer that meets their criteria.