“John, why are all my offers coming back asking me for my highest and best offer?”
I hear this question a lot when we get into a competitive spring market.
The agents selling properties in the DC area know there is a sweet spot when it comes to price. If they enter the market to high – the home will sit there and not get any offers.
But – when they list the property at the right price, just a little under what everyone is expecting, it will get the crowd of buyers attention. The next thing you know, you as the excited buyer, get hit with the request for “highest and best”.
This can get very frustrating for people new to the business. They get nervous – and the next thing you know, they start raising their offer price – EVEN THOUGH THEY HAVE NO IDEA WHAT OTHER PEOPLE ARE BIDDING!
More than once, I have seen people start competing against themselves. Let me explain.
Newbie Ned is combing his target neighborhoods for a good deal – when finally an ideal property hits his desk. After doing all his analysis, he puts in an offer that would allow him to make a nice profit on the property. Since Ned knows the game his offer is just a little over the asking price. Then poor Ned gets an email that is requesting his highest and best offer and it must be received by 5pm.
Now it’s 4:30 and Ned starts to question his numbers… and the next thing you know, he is re-submitting his offer – but this time for an additional 12 thousand dollars. His logic is that he needs to do a deal to stay busy, and maybe he could do the project for just a little less profit than he originally desired. After all, he doesn’t need to get too greedy, right?
Ned gets a call the next day – “Congratulations Ned – You won the contract!”
But Ned soon learns the other offers that he was competing against were all less than the asking price! Not only did Ned just lose 12 grand in potential profit, but he may never know just how low he could have gone and still “won”.
Let me give you this advice – submit your best offer the first time. If the buyer wants a higher price, they will negotiate with you by providing a counter-offer.
Don’t fall for the highest and best tactic. You may end up competing against yourself.
Let me know if there is anything I can do to help your business here in the DC area,
Washington REIA Network, President
If you don’t learn something new at WREIA this month it will be because you didn’t join us on April 15th. Make plans to join us before it’s too late. You can find the WREIA reservation page at http://wreia-april2013-cc2.eventbrite.com