What Does “Highest and Best” Offer Mean?
Multiple offers in Wellington Florida have become commonplace again and homebuyers are being instructed to submit their “highest and best” offers. While the “highest and best” offer defines itself, as a listing agent I do not think every home buyer fully understands what it actually means and how sellers handle multiple offers.
Lately, all of the “highest and best” offer situations I have been involved in seem to have one constant commonality, buyers are increasing their purchase price, but do not change any of the other offer terms; escrow, inspection period, close date, mortgage contingency period or short sale contingency period. While a buyer can have the “highest” price if their other terms are not the “best” they could possibly lose in a multiple offer situation.
A few months ago one of my Wellington home sellers received 8 offers and once the “highest and best” deadline came to a close the seller quickly narrowed it down to the two strongest offers. The two offers were identical, except for the inspection period, one buyer offered a 5 day inspection period while the other offered 3 days. Guess which offer the seller accepted? Yes, in this “highest and best” multiple offer situations it came down to a two-day difference in the inspection period.
If you are a home buyer purchasing a home in Wellington Florida you better be prepared for battle! Make sure you fully understand every term you are offering the seller and how those terms may affect your chances of winning in a multiple offer situation.
DO NOT just submit your “highest” offer, make sure you submit your “highest AND best” offer.
DO NOT think the only term that matters to the seller is price because when a seller receives 10 offers with the same purchase price it does come down to the other terms. If you can do the inspection in 2 or 3 days don’t put 10 days.
DO NOT say you will shorten the inspection period or will put more money in escrow, do it! Oftentimes in a multiple offer situation, the seller is looking at what is in writing, NOT what a buyer says they will do.
DO NOT submit an offer with outdated proof of funds or no proof of funds at all. When a seller has 5 other offers on the table that are just as strong as yours they most likely will not wait for you to provide current proof of funds.
Below is an example of the types of offers I am seeing in “highest and best” multiple offer situations with a list price of $200,000, if you were the seller which offer would you choose?
|Offer #1||Offer #2||Offer #3||Offer #4||Offer #5|
|Mortgage Contingency||0 days||30 days||0 days||45 days||0 days|
|Inspection Period||10 days||7 days||3 days||5 days||7 days|
|Close Date||30 days||60 days||30 days||45 days||21 days|
In my experience, most Wellington sellers would accept offer #3. While offer #4 has the highest offer price the buyer is also asking for a $10,000 seller concession, so they are essentially offering the seller $200,000, NOT $210,000 and it’s contingent on obtaining financing.
Offer #3 does not have a mortgage contingency, has the highest escrow deposit, shortest inspection period and while it doesn’t have the shortest close date these particular cash buyers might be more than happy to close quickly if the seller wants them to.
Which offer would you choose?
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About the Author
Top Wellington Realtor, Michelle Gibson, wrote: “What Does “Highest and Best” Offer Mean?”
Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell, or rent she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.
Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres, and more.