Re thinking Highest and Best and Contingency Offers!
Listing agents, buyer’s agents and buyers cringe when hearing multiple offer situation. The only entity that thrives in multiple offer situation is the seller – Seller’s be ware as you too can lose big in multiple offer situation!
Recent Example Within a few days I had 3 offers on 1 listing. 1st offer was from a buyer who had to sell (close) on their home before they could buy (close) on my listing (their home was under contract) BUT when they did close on the sale of their home their purchase of my listing would be a cash purchase with no scrutiny of mortgage appraisal on my listing. Within hours I had two other offers, they were:
Even though there were multiple offers for full ask and or above it was starting to look like the best offer would be the contingency buyer. When the buyer’s agent on the 1st cash contingency offer learned there were two other offers that were not contingent this agent rather naturally assumed that their offer would be rejected. This agent was thrilled to learn that we went with her buyer’s contingency offer.
Going with the highest offer might not be the best option. Agents and buyers need to further scrutinize Highest and Best as the best offer may not be the highest offer. Case in point I have an acquaintance who recently listed their home for sale (not with me) within days they had 3 offers all 3 for well OVER ask. They went with the highest offer only to discover a few weeks later that the appraisal came in $20,000 under.
Going with the highest offer only pays off when there is no chance the property might not appraise and really how often can anyone be completely certain of that?
The buyer who is willing to forgo the 3rd party financing condition addenda is the buyer who displays the highest level of confidence in obtaining financing. This also means the buyer must possess the extra money to pay the difference between mortgage appraised value and sale price. Not every buyer can do this but some can. Yes the buyer would forfeit their earnest money if the buyer could not obtain a loan. And the buyer would forfeit the earnest money if they did not have the difference plus their other funds required if the property did not meet value. I realize that $1,500 or so give or take a few hundred or a few thousand is MUCH to gamble and to lose for the buyer by the same token it’s also much to lose for the seller when they do go with the highest offer without monetary protection. Money Talks!
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