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Q. We’ve been searching for $15,000 - $20,000/month rental in the West Village for a couple of months. There seems to be very limited inventory.
Yesterday, we found the perfect home and our broker submitted our offer. We were told by the listing broker that they have multiple offers and we need to submit our “highest and best” offer by 7pm on Friday.
What can we do to ensure that our offer is accepted?
A. There is no way to ensure that you offer is accepted, but there are a number of steps to take to make sure that you have the best opportunity to win in a multiple-bid situation.
First, ask your broker to e-mail the listing broker and ask him or her to respond with the protocol for the “highest and best” process. Here are a few questions to consider specifically asking:
- Will there be one or two rounds of bidding?
- How will you handle it if a bidder asks for a second bite at the apple (e.g. the bidder tries to make a higher bid after being told their highest and best bid was rejected)?
- Is the owner going to send out more than one lease agreement (i.e. with the purpose of accepting the first one signed and returned with checks)?
- Are there any additional elements of the deal that the seller would appreciate (e.g. move-in date, cash up front, larger security deposit, etc.)?
- When will a decision be announced?
Next, make sure that you think carefully about the bid that you make. Ask yourself, “At what price would I be totally comfortable losing this apartment knowing that I would not have offered $1 more?” Now is the time to go to your bottom line.
You may also want to consider waiting until just before the submission deadline to send your bid. If the listing broker is going to consider shopping your offer to the other bidders, this strategy will make that more difficult.
Similarly, if no statement is made as to when a decision will be announced, consider including a “sunset provision” in your offer. This would basically state that your offer will be withdrawn at a specified time if it has not been accepted by the landlord. If your offer is good, and the sunset withdraws the offer in a relatively short period of time, it might pressure the landlord to accept your offer rather than risk losing it.
You can also consider employing an escalation provision, though not all listing brokers and their clients will agree to allow you to use one. An escalation clause would state something like “we bid $500 per month higher than the next highest verifiable bid up to a ceiling of $22,000 per month.”
The problem here is that you take away the landlord's goal of trying to get people to bid their absolute highest by saying you’re willing to go just beyond the next best bid. That’s why the listing broker may balk at this strategy. Further, you need to feel comfortable after you win that the next highest bid was in fact legitimate.
Lastly, remember that there is no law requiring you to comply with the rules of a “highest and best” situation. If you lose, and you’re willing to increase your bid, you can have your broker submit a higher bid to the landlord for a “second bite at the apple.” In that event, remember to remind the listing broker of their obligation to submit all offers to their client. Depending on how the landlord feels about the fairness of this strategy, it may or may not be effective to trump the previous highest bidder.
Though these strategies have proven to be effective in specific situations, keep in mind that trying to be “too cute” with your maneuvering may turn off the landlord. This is when the skills of an experienced broker can help you carefully navigate the bidding process.
Mike Akerly is a New York City real estate attorney, landlord, and real estate broker. He is also the publisher of the Greenwich Village blog VillageConfidential.
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