‘Highest and Best' versus 'Best and Final' a Homebuyer's Guide to Offers
The purchase of a home will certainly be one of the most significant economic decisions you will undertake in your entire life. Understanding the selling strategies of ‘Highest and Best’ or ‘Best and Final’ will help you make your best offer.
There are signs that the real estate market is starting to slow down from the record-high rates of the past few years, bidding wars for houses are nowhere near finished. This is especially true in places where the market is challenging and competitive. The difference between purchasing your dream home and having to start all over again can be anything as insignificant as a minor misconception or misunderstanding of real estate jargon.
Take, for instance, the subtle distinction between the terms "highest and best" and "best and final," which define the types of bids a purchaser makes on a property. These concepts are both used to refer to the highest and best offer that a buyer can make. In preparation for, or the midst of, a bidding battle, many homeowners are requesting that buyers submit one of two distinct types of bids, highest and best or best and final.
Are you certain that you understand the distinction between these two kinds of deals? Continue reading to learn the definition of the term, as well as savvy strategies.
What Does It Mean for an Offer to Be The "Highest and Best"?
The phrase "highest and best" is becoming increasingly common these days among prospective buyers of homes. Buyers need to be familiar with this word to negotiate successfully.
When multiple buyers are interested in a property, the seller will receive multiple bids. This benefits their sales because it may assist them in obtaining a greater price.
Suppose the seller has multiple offers on the table. They will first need to evaluate them and then try to bargain one-on-one with each prospective purchaser, or at least with the bids that rank highest. The sellers will need to engage in a significant amount of back-and-forth, making counteroffers, waiting, and maybe receiving competing offers from the buyers.
Alternatively, the seller and the seller's agent could choose a solution that is simpler instead. They may put out a request for the "highest and best offer." They are letting you know "I have numerous good offers." In this case you still have a good chance of winning the war. The key will be keeping within your budget as well stay close to the other bids.
What Does It Mean for an Offer to Be The "Best and Final"?
When a seller requests a buyer's "best and final offer," it indicates that the seller is anxious to conclude the sale as soon as possible and has no intention of engaging in lengthy talks.
When we come across a seller that requests "best and final," it says that they do not wish to pit buyers against one another in a competitive bidding procedure. They want to stop the pricing war by ensuring that everyone has an equal opportunity to win. This strategy is utilized because it is more efficient than dealing with each bidder separately. You will only have this one final opportunity to submit the offer that will get you that home, so make sure it's a good one.
The phrase is also frequently used in the context of governmental procurement. An organization may propose that potential bidders submit their best and final proposals to guarantee that all interested parties will have the opportunity to provide the most cost-effective pricing for a particular contract.
Techniques For Making the "Highest and Best" Offer
During the "highest and best" discussions, buyers should request that their agent obtain as much information as possible regarding the offers that have previously been submitted. They need to find out what the seller considers to be the most significant factor in an acceptable offer.
For instance, will the seller require a rent-back contract after the closing, implying that the purchaser would not be able to move into the property immediately after the transaction has been finalized? Or is the seller ready to get rid of the property and searching for a buyer who can make a bid with a rapid closure in fewer than thirty days?
The proverb "cash is king" refers to the fact that the purchase offer condition can frequently close the contract, even if other proposals are marginally more attractive. Suppose you don't have access to cash, including a letter of pre-approval from a financial institution and always have a positive attitude. Sellers usually have more than one thing they are looking for in the deal.
Strategies For Making the "Best and Final" Offer
One strategy is introducing an escalation clause for offers described as "best and final."
When buyers provide a range of pricing and state that they will exceed any other competitive number by a certain amount, for example, $5,000, this is known as an escalation clause.
You can choose the maximum amount you are willing to pay above the current offer. If you have a limit you don't want to go over; you can declare that you're ready to pay $5,000 more than the highest verified offer if the total amount doesn't exceed your maximum.
Simply "having an offer stand out" is one method to implement. Why not make a counteroffer of $470,427 as opposed to $470,000? "It can truly assist you in standing out from the crowd."
We also suggest other strategies that are more conventional and are typically adequate. These strategies include trying to pay closing costs, nullifying certain contingencies, opting out of inspections, and more. We call this the “JS Bundle of Terms”.
The Process Behind a Highest and Best Offer
Sellers will consider your offer in its entirety as a unified package. Before deciding based on their requirements, which may or may not be entirely economical, they will consider everything from potential outcomes to the dates on which the deal will close.
Look at the following three deals:
● $300,000 with a contingency based on finance and inspection, and 45 days to close the deal
● $285,000 in cash, with a closing time of 30 days, no contingencies
● $292,000 in cash, with a 30-day closing period and a condition based on an appraisal
Which one does the seller intend to choose? Their needs will determine that. Is it a fast close, more money, or safer deal.
If you can get to the bottom of why the seller is selling their property, you will be in a better position to write an offer letter that will win them over and get you the home of your dreams. In the end, make sure to look for the best offer that suits your financial needs and consider the best option for yourself.
Don’t be discouraged—we know this is a lot. That’s why our team at JS REALTOR® is so committed to serving homebuyers. We want to make the home buying experience one that preserves the excitement but sheds the anxiety. We provide clear guidance and advice to help you find the right home, at the right price, in the right neighborhood. Download our FREE planning kit and connect with us today! Let’s go find your first home! Text/Call Jeff at 614.721.0450 or email Jeff@JSRealtorTeam.com. Offices in Columbus & Mansfield to serve Central Ohio. I Heart Real Estate, Broker.