Real Estate Investing Basics

Highest and Best: Two Words to Loathe and Love

110 Articles Written
highest and best offers

Highest and best.  If I was competing in the Olympics for a gold medal in pole vaulting then I’d love to hear those two words together.

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But as a real estate investor when I hear highest and best my blood pressure starts to rise.  My face turns red.  My jaw tightens.  Then I sit down at the computer and start typing words like moronic, stupid, childish, unprofessional, opportunistic, patronizing, condescending and dehumanizing.

Why do I feel this way?  Because when I’m asked if the contract I submitted is my highest and best it means the seller of the house I want buy has multiple offers.  And that, of course, puts the seller in the enviable position of jacking up the purchase price.

If this happens I graciously bow out of the competition.  I don’t want to be pitted against other buyers.  I want to be the seller’s only option.

Earlier this week over lunch with my business partner I had a revelation.  An epiphany.  A light-bulb-above-my-head kind of moment.  The term highest and best, in the proper context, can be a good thing for us real estate investors to hear, and be reminded of, from time to time.

How so? 

Ask yourself this question – are you making the highest and best use of your time each and every day?

Are you getting bogged down working in your business instead of on your business?  Are you too busy to find the next money making deal because you’re hanging ceiling fans?  Or perhaps you postponed that meeting with a potential investor/partner to check up on the painter? How much is replacing that front door lock yourself really costing you?

organizational chartWhen starting out in real estate investing you'll wear many hats – chief financial officer, director of marketing, acquisition specialist, general contractor, quality control supervisor, sales rep. And probably many more.

This is okay.  You’ll need to know how to do each of these things well in order to train your replacement.  That is, if you plan to do more than a couple deals per month.

At our lunch meeting my partner and I decided that the highest and best use of my time was finding our company more deals.  I’d become too focused on the rehab part of our business. He agreed to take over the remodeling supervision and quality control of our fix and flip houses.

This new approach has already paid off for us.  I was able to write three offers this week and get one accepted – a bank owned house that just got a big price reduction.  The best part is the seller never asked for our highest and best offer.

Apparently my highest and best effort was enough.

    Kyle Hipp
    Replied almost 9 years ago
    Great post. We must always remember to step back and see the big picture. At different stages in my investing career, I’ve had different priorities that were most important. I get so caught up in the pressures of the moment that at times I need to remind myself to step back and look at what I am actually doing and if it was actually the best and highest use of my time. The difficult part is defining when that change has occured. A couple months might be a holding pattern where knowledge gain is the biggest priority but at a certain point the next purchase or improvement needa to be made or else your face diminishing returns. Thanks again.
    Marty Boardman
    Replied almost 9 years ago
    Kyle, it seems like us entrepreneur types want to do everything ourselves. That’s good at first but in order for our businesses to grow help will be required. Thanks for reading.
    Troy Peterson
    Replied almost 9 years ago
    I don’t shy away from highest and Best offers. If ind that sometimes the banks use that to drive a higher bid even if all they have is something less that what you already offered. That does not mean I raise my price, but I do strive to structure my terms accordingly. I have had good success with winning at the highest and best strategy by giving great terms, like a really short closing time of 10 days or less. Naturally it takes them a typical 30 days to get the title work done, but by offering good terms I have gotten a few more deals that most other investors will walk away from.
    Marty Boardman
    Replied almost 9 years ago
    Troy, you are absolutely right. I don’t want to discourage anyone from getting into a highest and best game. It’s just that I don’t like hearing those words. I just got a deal playing the highest and best game because we had the best terms. I elected not to bow out because I knew they seller had just one other buyer in the mix. I appreciate your comment.
    Eric C. Fahrner
    Replied almost 9 years ago
    I am one of those mysterious REO realtors in the Phoenix metro area, and I moved about 67 REO properties for Wells Fargo in 2009, and about 40 in 2010. I’ve often seen my client price properties VERY competitively low to generate buzz. In my experience, a great many of the successful buyers were the ones for whom the initial offer… IS their highest & best. And was often well-above asking price! And they were quite willing to walk away if the bank wanted to do “the dance.”