Dealing with "Highest and Best" Multiple Offer Situations

There certainly has not been a better time to invest in real estate in the past 20 years. Prices have been reset in some areas to 20 years ago. The potential for equity gain from real estate purchases made in 2009 – 2011 is significant. As sales of homes increases along with the median home price, many buyers are finding themselves in “multiple offer” situations and are being requested to submit “highest and best” offers. As the shift continues, we are not just seeing this phenomenon in bank owned foreclosures, but in resale homes as well. When making an offer there are two key factors at play – the price, and the terms.

The price of the property is determined by two factors. The first is perceived value for both the seller and the buyer and the second is current comparable sales or market conditions. When putting together the highest and best offer, the one emotional determining factor is how bad does a buyer want that particular home. Putting forth a smart and fair price is recommended because the discount or deal is already built in the property. If you find a home you want to purchase that is $ 150,000 list price, is paying $ 165,000 to much? Short term it may be, but in long term it is going to gain value well above that purchase price of $ 165,000. The two things that I recommend researching is the assessed value to find out what the county tax assessors value the property at, and what the property was previously purchased for and when. I use a formula based on those two values, and current list price when recommending an offer price.

The second and probably the most leveraged component of the offer is terms.  Famed author and money guru, Dave Ramsey always says, "cash is king" and that could not be more true today. The two key components of an offer is currency and time.  A cash offer with a 30 day close is more appealing than a cash offer with a 45 day close, or a finance offer with a 30 day close.

The main advice is to be patient, be strategic, and work with your real estate professional throughout the process. Don’t get discouraged if your offer is not accepted. If you put in your best offer based on your financial ability, terms, and desire to own that property, that is all you have in your control.