If you’re house-hunting and find a home you’d like to pounce on, it’s crucial to make an impression with the seller. Because the average seller is fielding offers from several buyers at once, your highest and best offer is how to get the seller’s attention and get to the closing table. Here’s how to make your offer outperform the competition and get you into the home of your dreams.
A request for the highest and best offer can occur in real estate when a seller receives multiple offers during the sale of their home. The seller might request interested buyers to submit their highest offer with their best terms, allowing them to choose whichever one they like best without engaging in negotiations.
The request for highest and best offers means the seller sets a timetable for buyers to provide their strongest offers. Buyers then submit the offer with the most money they can afford and the most favorable conditions for the seller, such as waiving the inspection. Then, the seller selects the option that appeals to them the most.
For home buyers, the highest and best offer means outcompeting others with an excellent purchase price and terms, such as a later move-in date to give the seller more time to move. On the other hand, the best and final offer means making your offer distinct from others by providing special conditions, such as an escalation clause.
As the seller, you usually ask for the highest and best offer to eliminate negotiations and expedite the deal. It lets buyers know you’re looking for only the most serious offers. Conversely, with a best and final offer, you’re asking buyers to go above and beyond the competition to convince you to sell to them.
That said, highest and best versus best and final offers have much in common. In both cases, the seller asks buyers to submit an offer that appeals to the seller’s price point and contingencies. These scenarios occur when a home receives attention from numerous buyers, and the seller asks for the best offers to find the best deal.
When a seller asks for your highest and best offer, you typically have one shot at getting the seller’s attention. These tips can help you outpace the competition and clinch the deal.
A real estate agent is vital to the home buying process because of their knowledge of the real estate market and ability to negotiate on your behalf. They can provide information on the seller’s preferences so your offer hits the mark. For example, the seller might want to close as fast as possible or prioritize cash offers. Your real estate agent can facilitate communication and help you present your offer in the best light.
The point of highest and best offers is for the seller to see which offer is the most desirable. Make yours irresistible through the following strategies:
If you can’t make a cash offer, don’t panic; most buyers need a mortgage to finance their purchase. Plus, you can turn this dynamic into an advantage by going into the home buying process with your initial mortgage approval in hand. Your approval letter means a lender has agreed to provide you with a mortgage loan.
This document can give you the upper hand against buyers waiting for their financing to come through. Because sellers generally don’t want to wait on mortgage approvals and risk the deal falling through, they’ll typically pick a buyer with mortgage approval over a buyer without approval. In other words, a sky-high offer without mortgage approval is vulnerable to rejection by a lender, putting the sale in jeopardy.
An escalation clause can help you stay in the running if your offer isn’t higher than your competition’s. You can set a dollar amount for your escalation clause to surpass other offers. For example, say you offer $250,000 on a home, but you’re concerned another buyer is offering a thousand more. So, you include a $5,000 escalation clause, meaning you’ll go as high as $5,000 more than any other offer. You can set a ceiling for your escalation clause so you don’t accidentally commit to beating a $300,000 on the home (unless you’re comfortable with that price).
Sellers are looking for responsive buyers who move fast on the home. As a result, a seller might sour on the offer with the highest price from a buyer who drags out communications. In addition, if the seller is unsure which offer they like best, your speedy communication can help make the seller’s choice easier.
Selling a home in a red-hot real estate market can be dizzying. Sifting through offers and examining the terms can be overwhelming, but these tips can help you stay on point when you ask for the highest and best offers:
Your highest and best offer means putting your best foot forward as a buyer. Today’s real estate market puts pressure on buyers to distinguish themselves from dozens of others looking to make a purchase. Because a seller usually receive multiple offers on their home, they may use the standard of the highest and best offer to weed out buyers who aren’t serious or don’t have financing backing the offer. Therefore, buyers should gather as much information as possible on the situation to make their offer appealing to the buyer and get their financing in order before trying to close a deal.
The real estate market continues to see high demand, meaning buyers are at a better advantage with preapproval. If you’re ready to purchase a home, it’s best to start the mortgage application process with Rocket Mortgage® now. With an approval letter in hand, you can make your highest and best offer with confidence.
Ashley Kilroy is an experienced financial writer. In addition to being a contributing writer at Rocket Homes, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.