Highest And Best Offer In Real Estate, Explained (2024)

FAQs

Highest And Best Offer In Real Estate, Explained? ›

As the seller, you usually ask for the highest and best offer to eliminate negotiations and expedite the deal. It lets buyers know you're looking for only the most serious offers. Conversely, with a best and final offer, you're asking buyers to go above and beyond the competition to convince you to sell to them.

The terms “best and final” and “best and highest” typically mean the same thing and are used interchangeably. “Generally, if an offer is the best and highest a buyer can submit, it will also be the final offer they are willing to submit,” Jones says.

Definitions of highest and best use

The Appraisal Institute defines highest and best use as follows: The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value.

In real estate, a best and final offer is the prospective buyer's last and highest bid. Initiated by the seller of a property, all remaining parties must submit one last offer that is often not to be negotiated further.

Sellers can accept the “best” offer; they can inform all potential purchasers that other offers are “on the table”; they can “counter” one offer while putting the other offers to the side awaiting a decision on the counter-offer; or they can “counter” one offer and reject the others.

The typical (and somewhat formal) definition of highest and best use is as follows: The reasonable, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.

This conflict is not only price versus value. It is also that highest and best use assumes the use of the land that brings the highest value. Whereas the definition of market value assumes the most probable [sales] price.

Ultimately, a property's highest and best use must meet two criteria: It must generate enough revenue to cover the costs of construction and/or property improvements. It must generate enough revenue to turn a profit.

Do sellers always pick the highest offer? ›

The answer is often “no.” Conventional wisdom might suggest that during negotiations, especially in a multiple-offer situation, the buyer who throws the most money at the seller will snag the house. In reality, however, it doesn't always end up that way.

It is not a legally binding process, and it will be similar to making any other offer on a property. You should first discuss your offer and financial situation verbally with the estate agent before following up with written confirmation. I am writing to submit my best and final offer for [property].

A buyer can sometimes counter after a final offer as long as no contract has been signed. It all depends on the market conditions, which could make this method a little complicated and sometimes risky. Depending on the market, countering after a “final” offer could work to your advantage.

Asking for a highest and best offer might push the buyer closer to your target sales price, because it shows there's real interest in the property. In negotiations, buyers won't typically start with their highest offer with the goal of leaving a little wiggle room.

Legally speaking, there isn't a time frame sellers must respond to your offer. However, it's an unspoken rule in the industry that sellers and/or the listing agents should respond within a few days, with 48 hours the norm.

those three little words “Best and Final” or “Closed Bids”, “Sealed bids”, “ Final Offers” … they all mean the same.

The answer is often “no.” Conventional wisdom might suggest that during negotiations, especially in a multiple-offer situation, the buyer who throws the most money at the seller will snag the house. In reality, however, it doesn't always end up that way.

With best offer, you can offer the seller a price you're willing to pay for the item. The seller can accept, decline, or counter your offer by suggesting another price. Best Offer is a great way to buy the item you've been looking for at a bargain price.

When homebuyers are told to submit their “highest and best offer” the listing agent is indicating that there are multiple offers on the property and that all interested buyers should submit their best possible offer.

Real estate agents often suggest that sellers either accept the first offer or at least give it serious consideration. Real estate agents around the world generally go by the same mantra when discussing the first offer that a seller receives on their home: “The first offer is always your best offer.”