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If you’re in the process of house hunting, you’ve probably experienced market competition firsthand. While the market is starting to cool off, inventory is still tight, and many homes in desirable areas are still getting multiple offers. The latest National Association of Realtors data showed 2.5 offers for every home listed, which is down from a high of 5.5 but still firmly a seller’s market.
After you submit an offer on a house you love, the seller might ask for a “best and final” offer. This means, essentially, that the seller is asking all interested buyers to submit the most enticing offer they are able to, whether it’s a higher price, an all-cash deal or an agreement to waive any contingencies of the sale. If you encounter this phenomenon as a buyer, it’s important to understand what’s expected of you, and how to prepare. Here’s everything you need to know.
‘Best and final’ or ‘best and highest’ home offers
“A best and final offer is when a home buyer is asked by the seller to present the best terms they are willing to offer,” says Emily Jones, an agent with Keller Williams Edge Realty. “All factors considered, like the closing date, price and conditions, [should be] the best the buyer can do.”
The terms “best and final” and “best and highest” typically mean the same thing and are used interchangeably. “Generally, if an offer is the best and highest a buyer can submit, it will also be the final offer they are willing to submit,” Jones says.
Depending on where the seller is in the process of reviewing bids, you may be asked to submit your best and final offer right away, or you might have to submit a second offer that’s considered best and final. If your initial offer was the best one you could make, you aren’t required to submit a new offer with different terms.
If you’re asked by a seller to submit a best and final offer, sit down with your real estate agent to discuss how (and whether) to proceed. An agent’s expertise can be crucial here. Your options will, of course, depend on how much money you have to work with and what risks you’re willing to take. For example, some buyers will agree to purchase a home as-is as part of a best and final offer. That means they are agreeing to purchase the home in its current state, with no back-and-forth negotiating about repairs — a big perk for sellers. Think hard about how badly you want the home, and what you might be willing to offer, or give up, to make it yours.
When would a seller request best and final offers?
Jones most often sees a best and final call in the case of competition — as in, a bidding war. If the seller has gotten multiple offers on their home, one of those potential buyers might well be willing to go above and beyond their initial offer in order to close the deal. In a sense, asking for best and final is an attempt by the seller to sweeten the deal, hoping that one of the bidders will offer them even more.
There are a few other situations where a seller might call for best and final offers, though. “A seller may also request a best and final after going back and forth a number of times with the buyer during negotiations,” says Jones. “If the seller reaches their breaking point, they might ask a buyer for their best and final offer. That gives the buyer one last chance to put forward [an acceptable] offer before the seller turns their attention elsewhere.”
A best and final offer might also be requested if a home needs to be sold very quickly. Rather than going through the process of getting multiple rounds of offers, the seller might state upfront that they are looking for best and final offers only in hopes of expediting the process.
Best and final strategies for buyers
Submitting a best and final offer should be strategic — you don’t necessarily need to jump to an all-cash offer or increase your bid by a huge amount. “The best way to determine a best and final offer is to figure out what you’re comfortable walking away at,” Jones says. “If someone else were to pay more or offer different terms, and they wound up winning the bidding war, would you still be able to sleep at night with no regrets?”
Jones also notes that it’s important to make it clear that your offer is truly the best and final one you will make. “I like to lay out the terms and the client’s reasoning behind it, so there’s no room for the seller to push back and try to renegotiate.”
Ultimately, every buyer has constraints and limitations on what they’re willing, or able, to offer. For example, you might not be able to raise your bid by more than $10,000 without going way over budget. That’s OK — are you able to be more flexible with something else instead, like the closing timeline or move-in date? Or can you let it go after that, knowing you did everything you could?
When it comes to best and final offers, the best thing you can do as a buyer is be realistic. Don’t overextend your budget in the heat of the moment, and don’t make any compromises you aren’t comfortable with. Real estate is competitive, but you shouldn’t risk your financial health for a home you can’t really afford.