A best and final offer is exactly what it sounds like: the best offer a prospective buyer is willing to give for a particular home. Sellers may request best and final offers for several different reasons, but a common scenario is when multiple buyers are trying to purchase the same home.
Definition of Best and Final Offers
In situations of high demand, such as a seller’s market, a single property may receive multiple offers. Rather than negotiating separately with each buyer, the seller’s real estate agent may ask for the best and final offer from each interested party. This request will normally come with a few days’ notice to give buyers time to consider their options before the deadline to submit offers.
The phrase contains two separate terms, each with a specific meaning:
- Best: Includes several variables over which the buyer has control, including the price, contingencies, financing, and closing dates.
- Final: This is the buyer’s last offer; after they put it in, there will be no more negotiation for this property.
A buyer’s best and final offer is their final opportunity to bid on a property. To give themselves the best chance of being chosen, they’ll need to use their best homebuying negotiation skills. They may want to consider offering above asking price or dropping other obstacles to closing, such as removing contingencies, to make their offer stand out.
- Acronym: BAFO
How Best and Final Offers Work
Let’s consider an example of a best and final offer from the perspectives of both the buyer and seller.
Considerations for Homebuyers
Let’s say you and your partner are looking to buy a home in San Francisco. Your real estate agent has found you the perfect property. It’s priced under market value and was listed less than 24 hours ago. You put in an offer as quickly as you can, but the next day, your agent calls to let you know that it’s a multi-offer situation. The seller’s agent has asked that everyone put in their best and final offer within the next three business days.
You’d made your original offer contingent upon the sale of your current home, but to make your offer more competitive, you’ve decided to eliminate this contingency. You’ve also spoken to your agent and decided to offer well above the asking price in the hopes your offer will be the highest. After plenty of discussion, your agent submits the offer. All you’ve got to do now is wait.
Considerations for Sellers
Now let’s flip to the seller’s perspective. Since it’s a hot market, your property has had four offers within 24 hours of listing. Your real estate agent suggests you request best and final offers, and by the deadline, you’ve received follow-up offers from all four parties.
To decide which offer to accept, you’ll want to consider several things. All-cash offers can be enticing since they include guaranteed funding and can close more quickly. Offers without contingencies, such as requiring a home inspection or selling another house, can also be appealing.
Let’s say you’ve received an all-cash offer for just under list price as well as an offer that’s a few thousand over asking. If ease is your priority, you might choose to accept the all-cash offer. Even though it’s less, a rapid close means you’ll be out of the property more quickly with that money in your pocket. However, if your goal is to make as much money as possible on the sale of your home and you’re not in any rush to move, you might choose the higher offer.
Is a Best and Final Offer Worth It?
This is a difficult question to answer, and the truth is that it depends entirely on your situation. If you have a little wiggle room on your original offer, you may decide it’s worth it to increase the price or adjust your contingencies. You can also opt to resubmit your first offer as your best and final.
You can also walk away without putting in a best and final offer. If the property doesn’t seem right for you, you’ve already offered your best price, or you’re not willing to compromise on other factors, you don’t have to take part in a bidding war.
When it comes down to how much you’re willing to negotiate, ask yourself these questions:
- Do I have the ability to pay more?
- How badly do I want this property?
- Are there other available homes without multiple-offer scenarios?
- What contingencies am I willing to drop to appear more competitive?
Once you answer these questions, you’ll be able to decide whether submitting a best and final offer is worth it for you.
- A best and final offer is the final opportunity for a prospective buyer to make an offer on a home.
- Sellers’ agents typically ask for best and final offers in multiple-offer scenarios.
- You’ll usually have a couple of days to submit an offer before a set deadline.
- As a seller, asking for a best and final offer from each buyer means you won’t have to negotiate individually with everyone.