"Highest & Best," Explained

Multiple Offer "Rules of Engagement":
Highest (Offer) & Best (Terms)

Careful readers of MLS listings these days will notice more references to the phrase "highest and best" -- as in "highest and best offers due by noon, Tuesday."

What exactly is the listing agent talking about? Two things.

First, multiple offers have been received for the property in question (duh!).

Yes, these are increasingly common at the lower end of the market, particularly with bank-owned foreclosures priced, shall we say, "conservatively."

Once it's apparent that there are going to be numerous offers, a standard tack is to inform both prospective Buyers who've already submitted offers, as well as those who are on the verge of doing so. A deadline 24 or 48 hours away is announced, and everyone gets a chance to (re)bid.

Two. "Highest and Best" also means, "one round, with no chance to raise."

I've had more than one client, who, upon learning that their offer in a "multiples" situation fell short, insist on submitting a higher offer.

Unh-unh -- that's not how "highest and best" works (assuming, of course, the Seller is playing by the rules).

In fact, that's the whole logic behind "highest and best."

Instead of going multiple rounds with multiple Buyers, the Seller is basically saying, "cut to the chase and get to your highest offer -- with the best terms (contingencies, closing date, etc.) -- now."

Buyers in this situation not only have to decide what the property is worth to them -- they also have to guess what it's worth to the competition!