Worried about Multiple Offers? Remember: “Highest and Best”!
We've all heard real estate agents say they are requesting the “highest and best” offers from potential buyers of a home, but what does that actually mean? What do they really want? Buying a home is one of the most life-changing decisions you'll ever make and ensuring that your offer has been given its best chance is daunting; you don’t want to make the wrong move now. To help demystify matters, we're here to give you an overview of everything about the highest and best offers so that you go into real estate negotiations with the best chance at success!
So, what does “highest and best” really mean?
Different from real estate’s “highest and best use,” when we talk about the concept of "highest and best" we’re referring to the most profitable and feasible offer from the buyer that the seller would be most likely to accept. Agents typically request “highest and best” offers when there are multiple offers from more than one party made on the same property. Those looking to buy a property must be aware of how various factors can affect their purchase – such as location, size, price point, and real estate trends – to help them decide what their ideal highest and best will be.
For example, a first-time homebuyer in an up-and-coming real estate market might find a home that requires a low down payment but has great price appreciation potential. In this example, buying a property here could prove to be the highest and best use of funds for that particular real estate buyer. But most commonly, when a real estate agent requests, “Please give us your highest and best offer,” that refers to a buyer’s all-around best offer they can make when competing with other potential buyers for a property.
When it comes to strategic real estate investing, there are certain strategies that you have to implement to determine the highest and best offer for a specific property. It’s important to understand this perspective because it lets you into the seller’s head. One of their strategies is to look at all the offers that they have received and compare them side-by-side to see which one has the most favorable terms. This means that they will be considering things such as the price, any additional contingencies they want, when they want to close, and any other relevant factors that could impact their decision. They will also be taking into consideration the overall market trends in order to ensure that they select the offer that will provide them with the most financial benefit in the long run.
“Fair Market Value” vs “Appraised Value”...
Another crucial point is gaining a basic understanding of what is meant by "fair market value" and "appraised value." These terms are often found in dream home giveaways or first time home buyer down payment programs, they are popular terms and shouldn’t be overlooked by the buyer. Knowing the difference between the two is key because each could provide you with an entirely different outcome - one being much more expensive than the other. Fair market value pertains to what buyers may be willing to pay for the property while appraised value has more to do with what a property gathers as far as tax benefits and mortgage loan approval levels go. In any case, make sure you understand each concept before committing to anything, as understanding each could drastically impact your purchasing decisions. Still not quite clear on the difference between the two? Learn more here.
Additionally, if you are investing, navigating strategies for real estate investing can be tricky. Many people look to strategic real estate investing as a way to maximize their profits - after all, what if you could offer higher than the list price and still make a considerable return? This is another perspective to consider. While this strategy has many advantages, there are also risks associated with it. Sellers may find themselves in over their heads financially, be unable to get buyers interested at higher prices despite inflated costs, or simply not receive enough of a return for such a bold price point. Buyers, beware!
Try not to make these rookie mistakes!
Keep in mind that when it comes to real estate, almost everyone wants to ensure that they make the best possible offer, but there can be mistakes made in the process. Researching real estate pricing trends within a given area and understanding the benefits of deviating from market value are critical for buyers to bear in mind when deciding upon their highest and best offer. It is also important to take into account your own personal needs and requirements, you should also have an advocate by your side who is knowledgeable in real estate transactions in order to avoid any major mistakes when buying a home. Buyers should take their time and make sure they understand all the real estate nuances that go along with the process.
Commonly, mistakes may include overspending on a property, letting emotions influence the decision, or not doing enough research on the neighborhood or real estate trends. Buyers can best protect themselves and their future by ensuring they have done sufficient research and that they are offering only what they believe is their highest and best price. This will ultimately help prevent real estate mistakes when buying a home and ensure a good purchase in the long run.
When it comes to real estate transactions, even the slightest mistake can cost thousands of dollars. That is why it is important to be mindful and patient. Things like overlooking the inspection process or skipping your real estate agent’s advice can end up causing serious financial trouble in the long run. Before you make your offer, be sure to have discussed the potential pitfalls with your real estate agent, as well as take any necessary steps to protect your interests in what could be a large investment.
Whether you’re a first-time homebuyer in Florida or an experienced real estate investor, we’re here to support you throughout the real estate negotiation process! Click here to check out Denovo’s Space Coast real estate search bar. Or if you already have a property or a project in mind, reach out to our team of knowledgable experts here.