You have a real estate agent. Your real estate agent may have written offers with you. After you having your real estate write an offer on a piece of real estate that is for sale, they may have told you that there were Multiple Offers that have been received.
To clarify, that means that more than one person had written an offer on the same property you had interest in. At least one. There may be Several, we have had in excess of 23 offers written on one of our hottest bank owned listings in 2011. What a nightmare.
Instead of "rejecting" the lowest offers and those with "not so solid" financing(typically done), we countered everyone back that had submitted an offer. We did this because we did not want to exclude any of the buyers that may have been misinformed by their real estate agents.
Once you see the Counter Offer from the Seller, that is when things start to be understood. Mostly the counters specify terms, clear up "items for possession", and talk about deadlines, the waiving of contingencies, and inspection time frames. Besides these things, they give a time when a buyers "Highest and BEST" offer should be submitted by.
What is Highest and BEST?
Highest and Best refers to two different things. The "Highest", would be the most amount of money the seller will be able to have as their Net Profit, after all is said and done. The "BEST", has to do with financing. The BEST place any Seller can be, is with an all cash offer on their real estate for sale that "nets" them the most profit. Lesser then cash would be conventional, then FHA, then VA(listed in their order of respect by most sellers).
The bidding war has officially started:
Believe it or not, some banks mandate a specific time frame before they will view any of the offers that were submitted. That equates to most bank owned properties having to be active on the market for sale, being marketeted, for a specific amount of time. In some cases, we have experienced 7 days, 14 days and 21 days of "lead time", with regard to the properties the banks, and even Human Sellers, are selling.
The main reason is to get into a Multiple Offer Scenario - Highest and Best counter - on the property that is for sale. To create a "Feeding Frenzy" as you might by throwing "chum" into the sea to attract sharks.
Know the comps, get price points and values in the specific area where this property resides. Find out how much the last several sold for and from that amount deduct any concessions to get a more realistic price point. Don't exceed these amounts when you have been countered with a Highest and BEST.
Always have your line in the sand, the price point that you will not exceed. You may not get the first home you write an offer on, but with keeping to this rule, you will get one eventually and it's mortgage payment won't break your back!