September 4, 2019
One of the trickiest situations a NYC apartment buyer can face is a best and final offer round. There are a lot of complicating factors at play – a hot property, multiple bidders and very little information. Yoreevo has you covered with some tips to make it as smooth and stress free as possible!
Table of Contents:
What is a best and final offer round?
Why are best and final offers tricky?
How should you navigate a best and final offer?
How can you stand out in a best and final offer?
Do you need to raise your original offer?
Can you submit another offer after a best and final round?
Whoever came up with the term “best and final” offer round didn’t get creative. It is simply when buyers are expected to provide their best and final offer. They are sometimes called the equally straightforward “highest and best” offer rounds.
They are used by listing agents as the cleanest way to handle multiple offers. Rather than each buyer slowly leapfrogging one another with no end in sight, everyone simply provides one final offer and the seller chooses one.
After receiving all the initial bids, the listing agent goes back to everyone and lets them know when best and final offers are due. Usually the deadline is in a day or two.
In addition to price, the seller will consider each offer’s terms such as the down payment, any financing contingency, the targeted closing date, etc. In NYC, co-op sellers will also consider how likely a buyer is to be approved by the board. If the seller has a soft spot for the home, a personal letter explaining why the house will be in good hands may even tip the scales!
It can be hard to figure out the details, namely the amount, of your best and final offer because the other buyers are unpredictable.
While you and your agent can review comps in the building to get a general sense of how much the apartment is worth, you have no idea how much the other buyers will offer. Even if all the data indicates the apartment is worth about $800,000, there is nothing stopping another buyer from offering $850,000.
This unpredictability is by far the hardest part of best and final rounds.
Your agent will try to get additional information from the listing agent and give you a little guidance. For example, the listing agent may share how many offers are expected or what the highest initial offer was. They are not supposed to selectively disclose information - all buyers should receive the same information. That being said, if your agent doesn’t ask, they may not get it.
The best piece of advice for a best and final round is to submit an offer where you would be comfortable both winning and losing. The more indifferent you can be to the results, the better.
Obviously the goal of the offer is to win but you don’t want to get the good news only to second guess yourself. Did you pay too much? Could you have gotten it for less? Do you even want this apartment? A little buyer’s remorse is normal but best and final rounds lend themselves to even more.
On the other hand, you don’t want to come up short and regret not making a higher offer. If you’re in love with the property and you’ll lose sleep if you don’t get it, you may want to be more aggressive.
You and your agent should be looking at comps to guide your offer, not the asking price. Most properties that go to a best and final round will sell above the asking price and it’s not hard to see why. The low price is why there is so much interest to begin with.
There are two main factors sellers will consider when they’re evaluating the offers - price and financing. Financing is arguably equally as important as price because without it, you can’t actually buy the property.
Sellers prefer all cash buyers because there is very little risk of the deal not going through. Unless the buyer goes on a very unsuccessful trip to Vegas, the deal will close. The sale will also close about a month faster because there is no mortgage to underwrite.
If you are financing, a good way to compete against cash offers is to waive a financing contingency. However this does expose you to risks which you should review with your real estate agent and attorney beforehand.
Sellers will often push back on financing contingencies in best and final rounds. The last thing they want is to select a buyer who later can’t get financing, only to find the other buyers have moved on and purchased other apartments.
A good way to give your offer a little more firepower is to ask your agent for a commission rebate. That will allow you to make a higher offer at no cost to you!
Absolutely not! As we said, the best piece of advice for a best and final round is to submit an offer you're comfortable with. If your original offer was as high as you go, you can stand pat. Who knows - maybe you’re already in the lead and will remain on top!
While the listing agent is legally required to submit all offers to the seller, even after a best and final round, this is unlikely to be successful and not advised. To switch from the best and final winner exposes the seller to significant risk.
The better approach is to tell the listing agent you’re still very interested in the property and would like to be considered for backup in case anything goes awry with the current offer. This little bit of persistence has paid off for a number of Yoreevo's buyers!