Several years ago, I read an article on one of the real estate websites entitled “Highest and Best Are Not Synonymous.” The title says it all: the highest offer is not always the best offer. While this has always been true, in the distressed property market it is vital for all parties to the transaction to consider the fact that the highest one probably is NOT the best one.
Other Factors to Consider Outside of Price
In simple terms, although the highest offer may seem great, there may be terms and conditions that are not in the best interest of the seller. Hence, the seller needs to carefully weigh money vs. some of their personal concerns. For example, many moons ago, my husband and I listed our first home with a local agent. We received a handful of offers: one was all cash (and highest) yet the buyer wanted the offer to be contingent upon the city’s permission to install a larger septic tank, so that the home could be remodeled to include more bedrooms and bathrooms. We knew that this was a risky venture. What would happen if the city said ‘no’ that they would not permit the installation of the larger septic system? That extra $10,000 would not have been worth a dime because the offer would never get further than the table! It is situations such as the one I describe that demonstrate that highest is not always best. Sellers and their agents need to consider all aspects of the offer before making a decision.
Now, with regard to short sales, the offer that is the best is clearly from a buyer who is serious, who is willing to stick around, and who is willing to accept any changes to the terms and conditions that have been dictated by the bank. So, this means that the cash buyer may not be the best buyer. A cash buyer is not tied to a loan and can generally make quick decisions—such as the decision to move on. In the case of distressed properties, ‘best; was determined as the person who would be willing to wait and accept the lender’s terms and conditions.
Novice agents, homebuyers, and home sellers sometimes forget that highest and best are not synonymous. So, the next time you are out looking for property, keep in mind all of the considerations involved when presenting your highest and best.
Photo: flickr creative commons by Ian Mutoo