In a market where there are more buyers than there are homes for sale, multiple offers and bidding wars inevitably erupt. Asking all bidders for highest and best offers can be the most efficient way for a seller to select the offer that works best for him. Although stressful and frustrating, highest and best scenarios do give all bidders an equal opportunity to have their offers considered.
For now, multiple offers are the new normal. Buyers who aren’t comfortable with making highest and best offers may be better off delaying a purchase until the market takes a turn and competition abates. But if you’re a buyer who wants or needs to purchase now, there are several steps you can take to improve your chances of coming out on top.
Assemble your team. Work with a real estate broker who knows the market well and has had plenty of experience handling highest and best offers. You need a broker who knows how to best position your offer and advocate on your behalf. Line up an attorney in advance who will be available to turn around a contract quickly. Working with a broker and attorney who are well known and liked by their peers can be a big plus. When similar offers are compared, the people who are representing you just might tip the balance in your favor.
Mortgage preapproval. If financing, contact a mortgage broker or loan officer to find out how much you can borrow. Get a preapproval letter from a lender and keep it current. When you are ready to make an offer, check with the lender or mortgage broker to make sure the building is on the lenders’ preapproved lists. Knowing in advance that the building is considered loan worthy is crucial if you plan to waive a financing contingency.
Financial statement. Fill out a statement of financial worth, keep it up to date, and have it ready to submit along with your offer. Your financial qualifications are part and parcel of your offer. Be proactive and include it with your offer to show the seller that you are motivated and qualified to buy.
Do your homework. Familiarize yourself with what’s on the market and what’s recently sold. Understanding the market will enable you to recognize the right property when it comes along and give you the confidence to move quickly to secure it.
Be proactive and trust your gut. With buyers circling around every new listing don’t wait for the first open house. Make the time to see anything new as soon as possible. If you’ve done your homework and see something that will work for you, trust your judgment. Don’t lose time by second guessing yourself. If you act quickly and confidently with a strong offer you may even pre-empt other buyers and avoid a highest and best scenario.
Give it your best shot. It’s a seller’s market—unrealistic, lowball offers will get you nowhere. When it comes to highest and best offer, determine your “walk away” number— the number above which you won’t feel regretful if a higher bid is accepted. This may be your only opportunity to bid so don’t hold back.
Be flexible with terms. Over half the transactions these days are all-cash; if possible, offer cash and then, if desired, finance after you’ve closed. If you are financing, be prepared to waive the financing contingency. Other terms that can sweeten the deal for sellers include putting down a large down payment (if financing), offering to close at the seller’s convenience, and agreeing to sign the contract within a limited amount of time.
Don’t be too demanding or picky. Sellers want a buyer who is easy to work with. Making demands or coming across as picky will work against you in a competitive situation. Limit requests to what is absolutely necessary and listen to your broker if she advises against pressing too hard on a point.
Win over the seller’s broker. The seller is the one who decides which offer to accept but he typically looks to his broker for insight and guidance on how to evaluate the offers. Make a good impression on the seller’s broker by taking the time for a friendly chat , and be sure to convey how much you like the property.
Introduce yourself to the seller. Almost every seller has an emotional attachment to his home and hopes his buyer will love his home as much as he does. Write the seller a personal letter to let him know how thrilled you are at the prospect of purchasing his home and include the letter with your offer.
Ask to be back up. An offer accepted in a highest and best situation does not always lead to a signed contract. If your bid isn’t selected let the seller’s broker know you remain interested and ask her to keep yours as a backup offer.