Let's clarify that I am speaking about REO & Short Sale listings since that is the primary situation in which we encounter the call for Highest & Best Offer in a multiple offer situation in todays real estate market.
To a REALTOR, this is nothing new, unexpected, or all that confusing.
To a buyer, it seems, that this spins them off their previously stable axis. How do you explain to your buyer that there are competing offers on their CHOICE PROPERTY and you, their trusted representative, have no idea what those competing offers entail?
Buyers seem to be mystified by the idea that I am unable to find out the prices, terms, or even the number of competing offers. They cannot understand the concept that they may have to offer well over the "advertised" price for the property to have a chance of getting their offer accepted by the bank holding the property.
And how can it be that the offer with the HIGHEST PRICE might not be considered to be the BEST OFFER?
So, here is a list of information to try to explain this to the confused buyer:
1. Just like every home is different, EVERY SELLER IS DIFFERENT. That includes banks & asset managers. Negotiations proceed differently with different personalities, different times of the month, different times of the year. These are variables which are in play on every transaction.
2. The Highest Offer is NOT ALWAYS the Best Offer. Every seller takes into consideration all of the terms of the offer. Not just price. Contingencies can break the deal. Financing, inspections, appraisals, homes to sell, approval of the property by a third party, etc. There is virtually no way to anticipate how these variables can be mixed together to arrive at a decision on The Best Offer.
3. Ford Made 500,000 Expeditions (this is a hypothetical number, corrections are not necessary), but This is ONLY ONE HOUSE. You would not get into a bidding war over a new car, because in most cases Supply far exceeds Demand on any given day. Bob's Ford sells out on that Green Expedition you had your eye on. NO BIG DEAL. Just head across town to Jim's Ford and get an identical one from him for the same price. But this 1 house, on this 1 lot, in this 1 subdivision, on this 1 lake IS SPECIAL. Try not to make comparisons between other market segments and real estate. There is a difference.
4. You arrive at YOUR HIGHEST & BEST OFFER by considering your own desire for the property and your own financial situation. You have no control over the motivations or veracity of any other party. It is pointless to consider them. This is very important when dealing with REOs and Short Sales as the banks involved have no emotional attachment to the property. Likely, they have only seen it in a photograph or described in a BPO or appraisal.
5. What is best for you is to know your limits. Whether you are purchasing a property as an investment, or because you love it ("Investors" are not investors if they must LOVE IT to BUY IT!) your highest & best offer, is the price at which you say to your self "I will not pay ONE MORE PENNY than XXX".
If you are a buyer seeking guidance in purchasing a bank-owned property or a short sale, please contact me for assistance.
Visit my website to start your home search at www.DixonRealtyAdvisors.com
Jenna Dixon
Associate Broker
Dixon Realty Advisors
Parke Avenue Realty
770-374-4230
www.DixonRealtyAdvisors.com
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Hello all,
ReplyDeleteSometimes when a buyer is interested in purchasing real estate property, they would want to know if that property suits their needs such as location, profitability and etc. Highest and best use is a term that is use frequently in real estate appraisals to help analyze and determine the market value of the property. It states that the value of the land, building or any real estate property is directly related to the use of that real estate property. Thanks a lot......