Last week, the National Association of Realtors (NAR) released their most recent Existing Home Sales Report. According to the report: “The median
Competing Offers Highest And Best
In our current housing market you may have heard the words “we are accepting highest and best offers.” What exactly does that mean? Well, it could mean A LOT of things. But generally what the real estate professionals mean when they say this is: 1. There is more than one party placing an offer on the same home. 2. The seller is putting a deadline out there for the potential buyers to place offers and when the offers will be reviewed. 3. The seller is expecting all buyers to place their very best offers - that is the highest amount of money with the very best terms they can put together and that often will require no counter-offer from the seller.
An example on a home priced at $170,000: a buyer may offer $172,000, and allow the seller to stay for a full 30 days after closing, and the buyer will waive all inspections. That’s pretty straight forward. But there is a bigger point that I want to make.
In the past 5 days, yes 5 days, I have watched 2 houses go into a highest and best situation. In BOTH situations I have watched qualified buyers who really wanted the house hang back too long and lose to another offer. Why? It is really sad actually. They received bad advice from their agent. Stay with me. There is grace to go around and everyone makes mistakes. Yet, this could have been avoided. In both cases the buyer’s agents “played a game.” They told their buyers to make a very low offer while asking the seller to cover many of the buyer's costs. Initially both properties had NO other offer when the first buyer’s came in and made their low offers. By making a reasonable offer and not being insulting they would have locked up the deals and been on their way to owning their homes - not delaying the contract and allowing others to step up and pay a market value for the home. The window of opportunity closed.
When you wait and play a low offer game and then find you have to battle in a “highest and best” situation you may end up paying a higher price than if you had simply made a solid first offer.
To a seller $5,000 or $8,000 is a heap of money! Coming in with an offer that is $5,000, $10,000, or $15,000 lower on a property valued at $170,000 is painful to say the least. Now let’s translate what $5,000 translates to for a buyer on a 30 year mortgage. Ask a lender to confirm this. $5,000 at today’s rates will end up costing a buyer about $23 in additional mortgage payment each month. To be sure it is likely more than you had hoped. But is it worth losing the house? You’ll still be in better shape than renting. WIN you get the home!
My advice if you really do want the home, go in strong and decisive. Be really glad you are making an offer without competition of other buyers. Don’t waste an opportunity to lock up the deal. Ask yourself if it is worth losing the house to save a few thousand bucks?
If, on the other hand, you like the house but are willing to wait, and bragging rights that you got the house for a deeply reduced price is most important to you, toss an offer that is low and hope for the best. Occasionally you will win even in this competitive housing climate. The choice is yours.
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Some Highlights: Existing home sales are currently at an annual pace of 5.81 million, the highest pace since December 2006. The inventory of existing homes for sale has dropped