In our market, many buyers find themselves in a "multiple offer" situation, or a "highest and best" situation. Generally speaking, for a buyer, this situation can be emotional and upsetting and sometimes just downright confusing. In this blog I hope to shine some light on the "situation" of multiple offers.
Most "highest and best" offer situations are called for by a bank owned property, commonly known as a foreclosure or REO property. I have seen some individual sellers do this when they have multiple offers, but more often this is a foreclosure procedure.
A "highest and best" situation occurs when there are multiple offers on a property. There can be as little as just two offers up to as many as one can imagine. We've seen situations where there are 8-10 offers if a property is really hot.
While it is said by many that mutiple offers sitatuions are a scam or an unfair thing, the principle behind this procedure really isn't a bad one. When sellers have multiple offers they generally feel that it's fair to offer all the parties who have made offers one final chance to give their best offer. Most buyers do not make their best offer as their first offer. We all want to negotiate! If you found a home listed at $100k for example, but wanted to make an offer, you generally aren't going to offer the full 100k right? You'll probably offer 90k hoping to settle somewhere in the middle. You may even pay full price for the house if you like it enough right? If the seller just looked at everyone's initial offer a lot of people would be disappointed. To give you a fair chance at giving your best offer when there are multiple offers a seller will let you know that they are requesting your "highest and best" offer. It's a win-win for both the seller and the buyer. If it works out right the seller gets the best price for the house and the buyer gets the house they want.
Just a few other general pieces of information about "highest and best" situations:
1. You usually have 24-48 hours to submit your best offer. Pay attention to the deadline; once it has passed, it's done.
2. Try to keep the emotion out of it. Make a logical decision about your "highest and best" offer. Don't offer too much if the house isn't worth it just to win the offer if you know you shouldn't be paying that much for it. Sometimes competitiveness gets the best of buyers. Likewise, don't be silly and stick with a lower bid if you know the house is worth more, or if you know you'll be heartbroken if you don't win it out.
3. There are no guarantees. Just when you think you've made the best offer, someone makes a better one. It's incredible what buyers do in this market, especially on houses that are great buys. It's not uncommon to see houses sell for over list price. We've had several of these situations this year. One home was listed for $82,000 and ended up with a high bid of $91,000. One was listed for $399,900 and ended up with a high bid of $435,000. It happens on the low end and the high end! It's a crazy market.
4. DON'T GET MAD AT YOUR REALTOR! Haha - I just had to put that one in CAPS. We can't control these situations. We can't predict what other buyers are going to offer. We also can't really advise you as to what a winning bid might consist of or how high we think you should go. Just work closely with your Realtor to make your best offer. If you made the best offer you believe you could have made, win or lose the bid, you can't be mad.
5. There are other things to negotiate besides just price. Keep in mind there are several things to negotiate when you are negotiating a highest and best offer. While price generally speaks the loudest, closing costs, closing date, the amount of earnest money, and the type of financing (just to name a few) all count for something. For example, if Buyer A offers $3,000 more in price than Buyer B, but doesn't want to close for 60 days and wants $5,000 in closing costs then Buyer B may be the more attractive offer (assuming Buyer B wants to close sooner and asks for less in closing costs).
6. If you see a house you like, go view it asap! Don't wait! Get your offer in on it as fast as you can! Sometimes this whole situation can be avoided if you just act on it before every one else does.
We are very seasoned in highest and best/multiple situations. If you find yourself in one, we hope you have a good Realtor to guide you through the process. If not, give us a call or email. We're happy to help.