The Dreaded Best and Final Offers, Newton, MA.
The definition of a Best and Final offer in real estate is a buyer’s last and highest offer. A best and final is typical in response to a bidding war. A seller who has received several offers will usually ask top bidders to submit a best and final offer. This type of offer induces STRESS for the buyer and their agent. As an agent I will do an analysis of the property to determine fair market value. In a bidding war fair market value is determined by the person with the most potential to pay for the property and actually close the deal. The buyer with the highest offer does not necessarily mean the best offer. In the past 6 months prices in the under 1 million dollar market have sky-rocketed to the point of crazy. When I have a buyer in a bidding war situation and there are no comps to justify an inflated price I kind of cringe. What usually happens is a review of the comps and I speak frankly about the possibility of overpaying. My advice is to offer a number that means you don’t care if you don’t get the house for only $1.00 more, either because you can’t afford to pay more or you can’t justify paying more. That number must come from the buyer…Agents cannot change a buyers finances or their view of a dream home. As a listing agent it makes me sort of smile. My job as a listing agent is to close the deal at the highest price. The “close the deal” is key.
I recently listed a house below 1 million dollars, the sellers did everything we told them, de-cluttered, put items in storage, cleared out baby things, went away for the weekend with their two very young children so we could accommodate any showings. We had an open house on Saturday and Sunday and many private showings before or after the open house along with Friday and Monday showings. Offers were due by 4 on Monday. Realtors always know when the price is right…you phone rings — constantly! We had 100’s of prospective buyers view the home. Monday afternoon rolled around and we had 6 offers, I actually expected more but I should note the amount of buyer fatigue we heard. “I only have 20% to put down, I was out-bid on 3 other properties, I can’t waive my mortgage contingency, should I give up my inspection contingency?” No never do that. We reviewed the offers and presented them to the seller: basically you lay out the offers on the dining room table. This is the lowest, the middle and the highest. But wait the highest offer doesn’t have great financing but the next highest offer has incredible financing. It is easy to eliminate the low offers, not so easy to eliminate the fab financing offers. Closing dates, dates for inspections all come into play. In this particular case the highest offer also had the best financing. Lots of money to put down and a considerable offer amount above the next competing bid. Shortly after we left we had the unpleasant job of calling the agents or buyers themselves to relay the bad news. Buyers who make offers without an agent typically make dumb offers. Crazy high offers with 500 contingencies, low offers that would have made no sense 5 years ago and of course the ASK…”I am not using an agent so the seller only has to pay 1/2 the commission.” UGH, that’s a post for another day.
We did not go back for the best and final in this case. The offer was more than the seller had dreamed of, the financing was perfect, the buyers were seasoned and seemed reasonable while viewing the house. We felt that these were the right buyers. If we went back for best and final there is risk of annoying the buyer who stepped up to the plate from the beginning and feels he is not treated fairly and decides to walk. Or you can have a buyer increase their offer in the heat of the moment only to wake up with buyer’s remorse. They may regret their decision and then try to “renegotiate” the price based on some little inspection issue. In the end you want the seller to go to the closing table. Most often the seller is purchasing another home and the timing of this closing must coincide with the closing of the new home.
Buyers — put your best foot forward, DON’T panic, and let the chips fall where they may. There will be another house for you. Sellers –DON’T get greedy, the most successful deals happen when each party leaves a little something on the table for the other guy.