Who benefits from "best and final offer" on condo?

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bostondan
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Who benefits from "best and final offer" on condo?

Post by bostondan » Tue Apr 24, 2018 10:03 pm

I am curious about the reasoning behind "best and final" offer requests when purchasing a home.

We put an offer in for a condo at $1.25m, all cash, no contingencies. We were confident in the condo being an excellent fit. The asking price was $1.19m. After filtering out many offers, they got down to just two. After some time, the other buyer apparently offered "around the same, but slightly more."

They then asked for "best and final offer." Since this was just round one, and it was only between two buyers, we thought that was just a game they were playing. We raised our offer to $1.275m, but made it clear that we were happy to exceed any higher offer if they received one from the other buyer.

Shortly after, we were told the other buyer's offer had been accepted despite our willingness to go higher. We were essentially told, "too bad, yours was supposed to be best and final."

Given that we very clearly indicated a willingness to go higher, but not just blindly increase by $100k, and that an increase of $25k in our bid seemed reasonable for step 2 of bidding, it makes no sense to me how this played out. Isn't it in the best interest of the seller to hear if we were really willing to beat the other offer? Our offers were nearly identical except for price, or so we were told.

It seems like "best and final" is just a way for the agents to be done quickly and not have to work hard for the small amount of increase in their commission that would result from additional back and forth.

So, please explain to me the logic behind "best and final."
Last edited by bostondan on Tue Apr 24, 2018 10:25 pm, edited 1 time in total.
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mpsz
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Re: Who benefits from "best and final offer" on condo?

Post by mpsz » Tue Apr 24, 2018 10:13 pm

bostondan wrote:
Tue Apr 24, 2018 10:03 pm
It seems like "best and final" is just a way for the agents to be done quickly and not have to work hard for the small amount of increase in their commission that would result from additional back and forth.
Yes.

Two other things:
- There's the chance that one party might offer much, much higher than needed to beat the other party. You offered $1.275, the other party could have offered $1.375 thinking that you would have offered $1.35. That's not how it played out here, but that was a possibility.
- The other party could have also said they'd beat your offer.

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bostondan
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Re: Who benefits from "best and final offer" on condo?

Post by bostondan » Tue Apr 24, 2018 10:50 pm

mpsz wrote:
Tue Apr 24, 2018 10:13 pm
Yes.

Two other things:
- There's the chance that one party might offer much, much higher than needed to beat the other party. You offered $1.275, the other party could have offered $1.375 thinking that you would have offered $1.35. That's not how it played out here, but that was a possibility.
- The other party could have also said they'd beat your offer.
If the other party offered $1.35 and we said we would beat it, it seems irrational to not come to us to ask if we really would beat it. At worst they have an offer of $1.35, and at best they have an even higher offer from us.

If the other party also said they would beat our offer, that is literally the exact definition of when to NOT stop a bidding war. The time to stop is when one party no longer is willing to beat the other.
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staythecourse
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Re: Who benefits from "best and final offer" on condo?

Post by staythecourse » Tue Apr 24, 2018 10:53 pm

The person who benefits is the seller and/ or their agent. They had 2 offers very close and wanted to find out quick by putting some pressure who was willing to significantly increase their offer to "win" the condo.

From the side of the buyer I like this move as it quickly ends/ prevents drawn out negotiations. Truth be told, I used the same move on when I sold my own townhouse myself without an agent. There was a couple who I was told by their agent wanted the property, but just kept delaying putting an offer in. I told the agent there was another offer on the table and would give both 24 hours to put in the final offers. It nudged the couple to put in the offer and deal was done next morning by 10a.m. I didn't try extorting more money out of them, but figured they just needed a nudge to put in a offer AND the final offer they would have considered. In the end there was no other buyer. Got the job done and everyone went home (pun intended) happy. Not sure if the other agent every figured it out. Doubt it though as the agent tried "educating" me that you can't ask for best offer in case both parties put in the same offer. I just politely let it go and said I could do anything I want since it was my property.

Good luck.
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Re: Who benefits from "best and final offer" on condo?

Post by bostondan » Tue Apr 24, 2018 10:57 pm

Also, if anybody has a buyer’s agent that works in the Boston/Brookline area and that you think is really good, please feel free to PM that information.

Our agent did a few things that we didn’t like. We feel like he isn’t really aligned with our interests. For example, he told us to not waive a specific contingency under any circumstances and that he felt very uncomfortable doing it (something about reviewing the condo docs). The other buyers then waived that, so he came back to us saying, “oh you can totally waIve that it’s no big deal.”

If he were aligned with our interest, he would have said, “I know I just told you not to waive this under any circumstances, but it appears you’ll have to in order to win. It’s not ideal, but may be necessary. The reasons it could be risky are X, Y, and Z.” Instead, he just went full force trying to make us think he hadn’t told us it was terrible to do this a mere ten minutes earlier.
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Re: Who benefits from "best and final offer" on condo?

Post by bostondan » Tue Apr 24, 2018 11:01 pm

staythecourse wrote:
Tue Apr 24, 2018 10:53 pm
The person who benefits is the seller and/ or their agent. They had 2 offers very close and wanted to find out quick by putting some pressure who was willing to significantly increase their offer to "win" the condo.

From the side of the buyer I like this move as it quickly ends/ prevents drawn out negotiations. Truth be told, I used the same move on when I sold my own townhouse myself without an agent. There was a couple who I was told by their agent wanted the property, but just kept delaying putting an offer in. I told the agent there was another offer on the table and would give both 24 hours to put in the final offers. It nudged the couple to put in the offer and deal was done next morning by 10a.m. I didn't try extorting more money out of them, but figured they just needed a nudge to put in a offer AND the final offer they would have considered. In the end there was no other buyer. Got the job done and everyone went home (pun intended) happy. Not sure if the other agent every figured it out. Doubt it though as the agent tried "educating" me that you can't ask for best offer in case both parties put in the same offer. I just politely let it go and said I could do anything I want since it was my property.

Good luck.
Thanks for sharing your experience. I don’t think it is analogous to my situation though. There must have been another real offer or else they would have accepted ours.

Also, nothing had been drawn out yet. This all took place over an hour or two. It seems unlikely that it benefited the seller.
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Re: Who benefits from "best and final offer" on condo?

Post by quantAndHold » Tue Apr 24, 2018 11:02 pm

For the seller, it isn’t entirely about money. It’s also about having a buyer and buyer’s agent you can work with. When they asked for best and final offer, they were asking for best and final offer, and you apparently didn’t believe them.

Would I have done it differently? Yes. But when both the top bidders are willing to escalate, this is a perfectly reasonable way to resolve it.

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Re: Who benefits from "best and final offer" on condo?

Post by bostondan » Tue Apr 24, 2018 11:05 pm

quantAndHold wrote:
Tue Apr 24, 2018 11:02 pm
For the seller, it isn’t entirely about money. It’s also about having a buyer and buyer’s agent you can work with. When they asked for best and final offer, they were asking for best and final offer, and you apparently didn’t believe them.

Would I have done it differently? Yes. But when both the top bidders are willing to escalate, this is a perfectly reasonable way to resolve it.
Does willingness to escalate need to be rapidly (like within an hour) resolved for the seller? This seems like an issue for the buyer, not the seller. Having two parties wanting to escalate seems like the exact problem a seller would want to have.

I still am not clearly seeing how this benefits the seller. I do see how it benefits the agent, just not the seller. Also, I think we were perfectly pleasant and waived all contingencies, so it’s not like we were being difficult to work with. The seller also wanted to do a leaseback and we said they could stay there as long as they liked.
“There may be times when we are powerless to prevent injustice, but there must never be a time when we fail to protest.” - Elie Wiesel

staythecourse
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Re: Who benefits from "best and final offer" on condo?

Post by staythecourse » Tue Apr 24, 2018 11:12 pm

bostondan wrote:
Tue Apr 24, 2018 11:01 pm
staythecourse wrote:
Tue Apr 24, 2018 10:53 pm
The person who benefits is the seller and/ or their agent. They had 2 offers very close and wanted to find out quick by putting some pressure who was willing to significantly increase their offer to "win" the condo.

From the side of the buyer I like this move as it quickly ends/ prevents drawn out negotiations. Truth be told, I used the same move on when I sold my own townhouse myself without an agent. There was a couple who I was told by their agent wanted the property, but just kept delaying putting an offer in. I told the agent there was another offer on the table and would give both 24 hours to put in the final offers. It nudged the couple to put in the offer and deal was done next morning by 10a.m. I didn't try extorting more money out of them, but figured they just needed a nudge to put in a offer AND the final offer they would have considered. In the end there was no other buyer. Got the job done and everyone went home (pun intended) happy. Not sure if the other agent every figured it out. Doubt it though as the agent tried "educating" me that you can't ask for best offer in case both parties put in the same offer. I just politely let it go and said I could do anything I want since it was my property.

Good luck.
Thanks for sharing your experience. I don’t think it is analogous to my situation though. There must have been another real offer or else they would have accepted ours.

Also, nothing had been drawn out yet. This all took place over an hour or two. It seems unlikely that it benefited the seller.
Agreed there was definitely other buyer. My guess, the agent or seller wanted to be done quick. In the end it worked as, my assumption, the other buyer put in a bigger offer. In my limited experience when they say last and final they really do mean last and final. After saying that no one is really unethical to come back and bargain again.

Good luck.
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Re: Who benefits from "best and final offer" on condo?

Post by TropikThunder » Tue Apr 24, 2018 11:31 pm

quantAndHold wrote:
Tue Apr 24, 2018 11:02 pm
For the seller, it isn’t entirely about money. It’s also about having a buyer and buyer’s agent you can work with. When they asked for best and final offer, they were asking for best and final offer, and you apparently didn’t believe them.

Would I have done it differently? Yes. But when both the top bidders are willing to escalate, this is a perfectly reasonable way to resolve it.
As a seller my idea of "resolve it" would not be to prematurely end the bidding when the 2nd place bidder has said he would go higher. I don't see "both the top bidders are willing to escalate" as a problem that needs resolution, but rather as an opportunity to take advantage of.

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Re: Who benefits from "best and final offer" on condo?

Post by KeepItSimple78 » Tue Apr 24, 2018 11:48 pm

OP, I think it ultimately circumstantial... likely the seller is in a time-sensitive situation and needs to unload the house.

Otherwise, as you and others have stated, the potential bidding up of the sale price would only benefit the seller and the agents involved.
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Re: Who benefits from "best and final offer" on condo?

Post by quantAndHold » Wed Apr 25, 2018 12:00 am

We sold a house in a hot market last year, and asked for best and final offers up front. All of the serious offers had escalation clauses written into the offer. It made it much easier to just pick the best offer so we could all get on with our lives. The winning offer ended up being escalated about $100k over their initial offer.

Is that not something that’s done in Boston?

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Re: Who benefits from "best and final offer" on condo?

Post by HornedToad » Wed Apr 25, 2018 12:06 am

You also don't necessarily want to piss off your buyers and lose them by getting in endless rounds of bidding.

One thing you could have done in your offer is say offer is $5k over next highest offer not to exceed $1.35M. And that you have to be shown the valid other offer (id/agency can be hidden).

SInce then it's an escalating best and final based on alternative bids.

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Re: Who benefits from "best and final offer" on condo?

Post by jfn111 » Wed Apr 25, 2018 6:39 am

HornedToad wrote:
Wed Apr 25, 2018 12:06 am
You also don't necessarily want to piss off your buyers and lose them by getting in endless rounds of bidding.

One thing you could have done in your offer is say offer is $5k over next highest offer not to exceed $1.35M. And that you have to be shown the valid other offer (id/agency can be hidden).

SInce then it's an escalating best and final based on alternative bids.
Fully agree :sharebeer
There is a number of factors that go into Best & Highest. The best offer might not be the highest offer. A cash offer will be viewed more favorably than a 3% down FHA offer. (No appraisal problems).
An offer where they waive the inspection, or do a pre-offer inspection.
Flexibility on closing date can come into play if seller hasn't found a new home yet.

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Re: Who benefits from "best and final offer" on condo?

Post by midareff » Wed Apr 25, 2018 6:49 am

and maybe they greased the seller's agent.

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Re: Who benefits from "best and final offer" on condo?

Post by smitcat » Wed Apr 25, 2018 7:20 am

bostondan wrote:
Tue Apr 24, 2018 11:05 pm
quantAndHold wrote:
Tue Apr 24, 2018 11:02 pm
For the seller, it isn’t entirely about money. It’s also about having a buyer and buyer’s agent you can work with. When they asked for best and final offer, they were asking for best and final offer, and you apparently didn’t believe them.

Would I have done it differently? Yes. But when both the top bidders are willing to escalate, this is a perfectly reasonable way to resolve it.
Does willingness to escalate need to be rapidly (like within an hour) resolved for the seller? This seems like an issue for the buyer, not the seller. Having two parties wanting to escalate seems like the exact problem a seller would want to have.

I still am not clearly seeing how this benefits the seller. I do see how it benefits the agent, just not the seller. Also, I think we were perfectly pleasant and waived all contingencies, so it’s not like we were being difficult to work with. The seller also wanted to do a leaseback and we said they could stay there as long as they liked.

Your confusion stems from the fact that the highest sales price may not have been achieved. As a seller there are times when the timing as well as the terms are much more important than the absolute price. Terms such as % down or all cash sale combined with little or no contingencies with a favorable closing date can/could be more valuable than a $ increase in price. We are going through something similar now as sellers and price is not the only and utimate driver.

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Re: Who benefits from "best and final offer" on condo?

Post by FoolMeOnce » Wed Apr 25, 2018 7:27 am

Did you include an escalation clause, as others have referred to - include in your offer that you would best the other offer by $X up to $Y? If so, by how much did you say you'd escalate?

If not, maybe they felt better honoring the highest "final" offer than breaking their implicit word to extract another few thousand on a 1.25 million dollar sale. And if so, the same could be true if you included a small escalation clause. Maybe they were swayed by a personal letter from the other offer.

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Re: Who benefits from "best and final offer" on condo?

Post by mak1277 » Wed Apr 25, 2018 7:41 am

Some people just want to get the sales process over and done with, and are unconcerned (or less concerned) with squeezing every last drop of money out. The seller asked for best and final, you ignored the request, now you're unhappy and looking for answers...but maybe the seller just did best and final so they didn't have to monkey around with going back and forth. Personally, I understand that desire completely.

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Re: Who benefits from "best and final offer" on condo?

Post by rkhusky » Wed Apr 25, 2018 7:42 am

Some people just don't like bargaining or haggling. I know I don't. After some initial proposals, we've asked the top contractors to give us their best and final proposals and then picked without any further interaction. IMO, best and final means no further negotiations.

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Re: Who benefits from "best and final offer" on condo?

Post by Watty » Wed Apr 25, 2018 7:58 am

mpsz wrote:
Tue Apr 24, 2018 10:13 pm
There's the chance that one party might offer much, much higher than needed to beat the other party. You offered $1.275, the other party could have offered $1.375 thinking that you would have offered $1.35.
+1

With an ongoing auction with two people they are guaranteeing that the final price will only be a bit more than the the loser would pay. With a "best and final" they will get at least that much and possibly a lot more.

Did you hear what the winning bid was? If not it will be interesting to look it up in a few months.

There could also be situations where if they said "best and final" then allowed you to make a higher bid then the other buyer could sue for discrimination so I am not surprised that no higher bids were allowed.

The big problem was that your agent did not explain "final" really was final.

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Re: Who benefits from "best and final offer" on condo?

Post by hand » Wed Apr 25, 2018 8:00 am

While "best and final" as described may not have ended with the highest possible sale price, it still could have been to the benefit of the sellers:
1) They have a time constraint on when they need to accept offer
2) They believe it is important to keep their implied word in terms of "best and final" - no more negotiating
3) The offers were substantially different in terms of financing, timing, contingencies, or general PITA factors
4) They net more because listing agent is also writing the offer and willing to discount total commission
5) They dislike the negotiation process
6) Sellers have some secondary relationship with buyers and while they desire a basically fair transaction, they prefer to sell to this buyer (e.g. relative)
7) Losing "best and final" was so far below market / winning bid that further negotiation didn't seem worthwhile

If your agent didn't warn you of these possibilities when crafting a best and final offer that was lower than your true best on a property you didn't want to lose, they are not doing their job.

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Re: Who benefits from "best and final offer" on condo?

Post by Tal- » Wed Apr 25, 2018 8:20 am

hand wrote:
Wed Apr 25, 2018 8:00 am
While "best and final" as described may not have ended with the highest possible sale price, it still could have been to the benefit of the sellers:
1) They have a time constraint on when they need to accept offer
2) They believe it is important to keep their implied word in terms of "best and final" - no more negotiating
3) The offers were substantially different in terms of financing, timing, contingencies, or general PITA factors
4) They net more because listing agent is also writing the offer and willing to discount total commission
5) They dislike the negotiation process
6) Sellers have some secondary relationship with buyers and while they desire a basically fair transaction, they prefer to sell to this buyer (e.g. relative)
7) Losing "best and final" was so far below market / winning bid that further negotiation didn't seem worthwhile

If your agent didn't warn you of these possibilities when crafting a best and final offer that was lower than your true best on a property you didn't want to lose, they are not doing their job.
Bingo!

Reason 2 (wanting to stand by their word) and reason 5 (not liking negotiating) seem pretty common actually.

The only two things I would add:

1: Entering further negotiations runs the risk of losing both buyers. If the seller gives you a counter, the other buyer may go away while you negotiate with the seller; if you and the seller hit an impasse, the seller has lost both buyers.
2: On a related note, most real estate agents thrive on closing deals quickly rather than for top dollar. In that way, in my experience, agents are pushing clients (both buyers and sellers) into transactions quickly - even if doing so leaves some money on the table. With that said, the way real estate agents are paid makes it hard to blame the individual agents for doing this as it is probably more of a system problem than an individual problem.
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Re: Who benefits from "best and final offer" on condo?

Post by michaeljc70 » Wed Apr 25, 2018 8:32 am

Of course it benefits the seller and agent.

If you were to deal with each offer individually going back and forth, it would be difficult. Someone offers $500k, you counter $505k and in the meantime another bidder offers $507k- it gets into a mess. I suppose you could get everyone in a room and do it auction style, but I suspect the seller/agent don't want the transparency of that. I hear about "best and final" so often that I wonder if it isn't widely used when there is only one real offer.

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Re: Who benefits from "best and final offer" on condo?

Post by ResearchMed » Wed Apr 25, 2018 8:37 am

Watty wrote:
Wed Apr 25, 2018 7:58 am
mpsz wrote:
Tue Apr 24, 2018 10:13 pm
There's the chance that one party might offer much, much higher than needed to beat the other party. You offered $1.275, the other party could have offered $1.375 thinking that you would have offered $1.35.
+1

With an ongoing auction with two people they are guaranteeing that the final price will only be a bit more than the the loser would pay. With a "best and final" they will get at least that much and possibly a lot more.

Did you hear what the winning bid was? If not it will be interesting to look it up in a few months.

There could also be situations where if they said "best and final" then allowed you to make a higher bid then the other buyer could sue for discrimination so I am not surprised that no higher bids were allowed.

The big problem was that your agent did not explain "final" really was final.
Looking up the final sale price won't necessarily disclose what the "winning best and final offer" actually was.

There may have been some negotiating after an inspection, or some other changes if there were issues about closing date, or such.
It's also possible that another prospective buyer showed up, although that's less likely in such a short interval.

WE were that "last minute" offer on our current house.
In addition to other things going on (the seller's agent really botched it, but that was to our advantage), we had trouble reaching our agents and seller's agent wouldn't take offer from us. We are quite sure that seller's agent was hoping/trying to represent both seller and buyer.
In any event, we ended up faxing our offer to the seller's home fax machine, and apparently the agent was furious when it arrived, as we had the best offer, even if not necessarily the highest price (we'll never know that).
But we offered a "no financing contingency", having found out that sellers needed to leave the country in under 5 weeks (diplomat who was suddenly re-posted to another country), and their main concern was having it done, over, cash in hand, etc., when they got on that flight.

This wasn't listed as a "best and final" offer situation, but we found out that's sort of what it was.'

Point is, there are other reasons than "highest price" that can make an offer "best", although a good price obviously helps!

RM
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Re: Who benefits from "best and final offer" on condo?

Post by LarryAllen » Wed Apr 25, 2018 8:38 am

Seems like a pretty standard deal. When someone says best and final you give your best and final. You did not give your best and final and you lost. Next time give your best and final when asked. It's why people ask for best and final. They want to create urgency and get someone to bid a lot. I had a best and final last year, where I was buyer, but I stood pat as I felt my offer was strong as it was and I was right. Win some and you lose some.

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Re: Who benefits from "best and final offer" on condo?

Post by enclee » Wed Apr 25, 2018 8:53 am

When I sold my home, two offers were submitted with escalation clauses which essentially made them best and final offers. I prefer this style, best and final conveys the message that the seller is done negotiating and just wants to sell. You didn't listen to the seller and lost the bid, but now you know.

It's in the sellers best interest to sell the home quickly,the longer the house sits the lower the price will become. There's a brief window of time to maximize the interest of buyers, so real estate agents have to push for quick deals. Even people that flip properties know, they have to get in and get out quickly because the market can change in a matter of weeks.

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Re: Who benefits from "best and final offer" on condo?

Post by LiterallyIronic » Wed Apr 25, 2018 8:54 am

quantAndHold wrote:
Wed Apr 25, 2018 12:00 am
We sold a house in a hot market last year, and asked for best and final offers up front. All of the serious offers had escalation clauses written into the offer. It made it much easier to just pick the best offer so we could all get on with our lives. The winning offer ended up being escalated about $100k over their initial offer.

Is that not something that’s done in Boston?
Escalation clause? Is that something to the effect of "if anyone offers more than us by $X or less, our offer increases by $X"? Never heard of that. I've only bought one house, but we did put an offer in on one before the one we got. The asking price was $215, we offered $205, they asked for "best and final", so we offered $209. Then they still came back and said there was a better offer and asked if we could go to $212. We declined and told them that since it had been the requisite 48 hours since we offered the $209 and they hadn't accepted, that our offer had expired. I have no idea if there really was another offer or if they were playing hardball. But an escalation clause seems weird - either it's escalating just a few thousand and probably won't make much of a difference, or it would escalate a ton which means you were buying a house outside your price range, or you had a huge price range?

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Re: Who benefits from "best and final offer" on condo?

Post by mmmodem » Wed Apr 25, 2018 8:56 am

Unfortunately, you may never know what the reason is for the seller to not come back to you. I participated in a similar best and final offer recently. We would have happily, my wife anyway, increased our offer if they had come back to us. So we weren't following their rules for best and final offer. We were not chosen.

What shocked us was that the home eventually closed for $20k less than our offer. Why? We may never find out. Post repair contingency negotiations? All cash offer? No contingency offer? It certainly wasn't a rapid close as we found and closed on our home a few days after it closed. Maybe it was a family and friend discount?

Lesson learned is to not get too emotionally involved until you sign on the dotted line.

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Re: Who benefits from "best and final offer" on condo?

Post by ResearchMed » Wed Apr 25, 2018 8:58 am

LiterallyIronic wrote:
Wed Apr 25, 2018 8:54 am
quantAndHold wrote:
Wed Apr 25, 2018 12:00 am
We sold a house in a hot market last year, and asked for best and final offers up front. All of the serious offers had escalation clauses written into the offer. It made it much easier to just pick the best offer so we could all get on with our lives. The winning offer ended up being escalated about $100k over their initial offer.

Is that not something that’s done in Boston?
Escalation clause? Is that something to the effect of "if anyone offers more than us by $X or less, our offer increases by $X"? Never heard of that. I've only bought one house, but we did put an offer in on one before the one we got. The asking price was $215, we offered $205, they asked for "best and final", so we offered $209. Then they still came back and said there was a better offer and asked if we could go to $212. We declined and told them that since it had been the requisite 48 hours since we offered the $209 and they hadn't accepted, that our offer had expired. I have no idea if there really was another offer or if they were playing hardball. But an escalation clause seems weird - either it's escalating just a few thousand and probably won't make much of a difference, or it would escalate a ton which means you were buying a house outside your price range, or you had a huge price range?
The type of escalation clause we are familiar with is along the lines of "$X more than the current highest offer [forget how this is worded], not to exceed $Y".

But sometimes the "best" is more important than the "highest" in terms of financing situation, closing conditions, timing, etc.

RM
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onthecusp
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Re: Who benefits from "best and final offer" on condo?

Post by onthecusp » Wed Apr 25, 2018 9:13 am

I find in negotiations that it is always best to look to myself about what I'm willing to do first. Then take the other side at their word. They said best and final offer, and in this case they meant it. They were not looking to play one side off the other and probably felt honorable and happy to put it behind them.

Next time you may do this and find the other side is being deceptive like you thought they were this time. Your best and final offer gets shopped back to the other side. Or you may find there was not really another bidder. These deceptive practices are common in real estate and what you expected of your lost opportunity. My advice is to move on and be true to yourself in the future. When you play the game, be prepared to lose because others are using different rules.

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Re: Who benefits from "best and final offer" on condo?

Post by 8foot7 » Wed Apr 25, 2018 9:32 am

Sometimes words mean what they mean. “Willing to escalate” isn’t your best or your final. “I’m willing to pay $1.5 and not a penny over” is your best and final.

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Re: Who benefits from "best and final offer" on condo?

Post by fourkids » Wed Apr 25, 2018 9:43 am

It means just that. Best and final.

Most buyers/sellers don't want to go through rounds and rounds of negotiations. It wastes time and energy of everyone.

Most people in a best and final situation truly put in their "walk away" price. This way everyone "wins". The seller gets the best price he/she can, and the buyer feels good that they "won" but didn't go over their max price. We all know in bidding wars, many people get caught up in the excitement and overbid.

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Re: Who benefits from "best and final offer" on condo?

Post by fourkids » Wed Apr 25, 2018 9:46 am

mmmodem wrote:
Wed Apr 25, 2018 8:56 am
Unfortunately, you may never know what the reason is for the seller to not come back to you. I participated in a similar best and final offer recently. We would have happily, my wife anyway, increased our offer if they had come back to us. So we weren't following their rules for best and final offer. We were not chosen.

What shocked us was that the home eventually closed for $20k less than our offer. Why? We may never find out. Post repair contingency negotiations? All cash offer? No contingency offer? It certainly wasn't a rapid close as we found and closed on our home a few days after it closed. Maybe it was a family and friend discount?

Lesson learned is to not get too emotionally involved until you sign on the dotted line.
I "won" a best and final situation for my house, and during inspection uncovered a few big problems that needed repair, and I was prepared to walk away. The seller simply reduced my price by $30,000 for this.

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Re: Who benefits from "best and final offer" on condo?

Post by cherijoh » Wed Apr 25, 2018 9:55 am

bostondan wrote:
Tue Apr 24, 2018 10:03 pm
I am curious about the reasoning behind "best and final" offer requests when purchasing a home.

We put an offer in for a condo at $1.25m, all cash, no contingencies. We were confident in the condo being an excellent fit. The asking price was $1.19m. After filtering out many offers, they got down to just two. After some time, the other buyer apparently offered "around the same, but slightly more."

They then asked for "best and final offer." Since this was just round one, and it was only between two buyers, we thought that was just a game they were playing. We raised our offer to $1.275m, but made it clear that we were happy to exceed any higher offer if they received one from the other buyer.

Shortly after, we were told the other buyer's offer had been accepted despite our willingness to go higher. We were essentially told, "too bad, yours was supposed to be best and final."

Given that we very clearly indicated a willingness to go higher, but not just blindly increase by $100k, and that an increase of $25k in our bid seemed reasonable for step 2 of bidding, it makes no sense to me how this played out. Isn't it in the best interest of the seller to hear if we were really willing to beat the other offer? Our offers were nearly identical except for price, or so we were told.

It seems like "best and final" is just a way for the agents to be done quickly and not have to work hard for the small amount of increase in their commission that would result from additional back and forth.

So, please explain to me the logic behind "best and final."
Well it sounds like the owners were being ethical and standing by their promise to take the "best and final" offer. Did you really expect them to renege on the promise?

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Re: Who benefits from "best and final offer" on condo?

Post by LarryAllen » Wed Apr 25, 2018 10:05 am

At least two different people in this thread talk about being willing to pay more and seem dumbfounded that the seller didn't pick them. Remember the seller has no clue what's on your mind. If they say best and final then go big! Lay all the cards on the table if you really want it. They don't know what's going through your mind or how much you might be willing to pay.

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Re: Who benefits from "best and final offer" on condo?

Post by adamthesmythe » Wed Apr 25, 2018 10:16 am

Reasons seller took the other offer:

1. Seller wants it done.

2. Seller is very happy to get more than list, and doesn't want to screw up the deal.

3. Seller feels honor-bound to keep his word.

4. Seller likes something else about the other buyer.

And maybe more. The thing about buying/ selling a house- you ALWAYS have an incomplete understanding of the motivations and thinking of the other party. You can never be sure how the other party will react. There will be aspects other than price that matter to each party.

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Re: Who benefits from "best and final offer" on condo?

Post by TravelforFun » Wed Apr 25, 2018 10:59 am

The seller asked for a 'best and final offer' or a BAFO. You submitted yours and asked for a side deal. If the seller had used the other buyer's BAFO and negotiated a higher price with you, that wouldn't have been fair to the other buyer. It's called bid shopping and not an ethical thing for the seller to do. I applaud the seller in this case.

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Re: Who benefits from "best and final offer" on condo?

Post by Dottie57 » Wed Apr 25, 2018 11:17 am

As a buyer, if I was in a bidding war I would drop,out.

I prefer the “best and final offer” over a bidding war where emotions can take over. But you really do have to give your best offer.

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Re: Who benefits from "best and final offer" on condo?

Post by michaeljc70 » Wed Apr 25, 2018 11:26 am

Dottie57 wrote:
Wed Apr 25, 2018 11:17 am
As a buyer, if I was in a bidding war I would drop,out.

I prefer the “best and final offer” over a bidding war where emotions can take over. But you really do have to give your best offer.
I drop out in either case generally. Either is an easy way to overpay. I've bought when it was a sellers market, but never where it was crazy like in some places you hear about like the Bay area where it might be unavoidable.

My last house I had 4 offers. I did best and final. List price was $700k. I got a last offers of $703k, $706k and $730k (one declined to participate). So, the $730k guy basically spent $23k more than they had to.

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Re: Who benefits from "best and final offer" on condo?

Post by Dottie57 » Wed Apr 25, 2018 11:46 am

michaeljc70 wrote:
Wed Apr 25, 2018 11:26 am
Dottie57 wrote:
Wed Apr 25, 2018 11:17 am
As a buyer, if I was in a bidding war I would drop,out.

I prefer the “best and final offer” over a bidding war where emotions can take over. But you really do have to give your best offer.
I drop out in either case generally. Either is an easy way to overpay. I've bought when it was a sellers market, but never where it was crazy like in some places you hear about like the Bay area where it might be unavoidable.

My last house I had 4 offers. I did best and final. List price was $700k. I got a last offers of $703k, $706k and $730k (one declined to participate). So, the $730k guy basically spent $23k more than they had to.
For me, I would offer more than my last bid only if the house really delighted me in ever aspect. Good views from windows, good garage space, Nice size ruins. Kitchen is semi open to dining room an kitchen but not the hated open concept.
Good laundry space. Well cared for woodwork. Good closet space. Good layout for kitchen and bathroom(s). And most of all a deck/patio which is spacious and can be turned into a screened in area.

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Re: Who benefits from "best and final offer" on condo?

Post by Bfwolf » Wed Apr 25, 2018 12:05 pm

With these escalator clause bids, I assume it's illegal for the seller to have a friend submit a bid just below the maximum in the escalator?

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Re: Who benefits from "best and final offer" on condo?

Post by ResearchMed » Wed Apr 25, 2018 12:12 pm

michaeljc70 wrote:
Wed Apr 25, 2018 11:26 am
Dottie57 wrote:
Wed Apr 25, 2018 11:17 am
As a buyer, if I was in a bidding war I would drop,out.

I prefer the “best and final offer” over a bidding war where emotions can take over. But you really do have to give your best offer.
I drop out in either case generally. Either is an easy way to overpay. I've bought when it was a sellers market, but never where it was crazy like in some places you hear about like the Bay area where it might be unavoidable.

My last house I had 4 offers. I did best and final. List price was $700k. I got a last offers of $703k, $706k and $730k (one declined to participate). So, the $730k guy basically spent $23k more than they had to.
What do you mean that the "$730 guy" basically spent $23k more than they had to"?
Importantly, they had no way to know that, what the "next best" offer was, unless this was an "open" bidding like at a country auction for "stuff".

They had ONE chance to give best and final.
They decided how much they were willing to spend, based upon the house characteristics AND how much they liked it.
It should be no surprise that everyone doesn't "bid the appraised value" or such.
Some people "want the house more" (and have the money to pay more).

The "same house" is "worth" different amounts to different people, unless it's truly a cookie-cutter house, and even then, perhaps the lot/location might differ.

Some people may prefer a "fixer upper"; they can design their dream kitchen or whatever.
Others might prefer a "move-in condition".
They'd each likely pay a different amount for the "same house". Or just the design (cape vs. tudor). Or floor plan....

That's why most homes, especially not brand new cookie cutter, don't have a single price that everyone would "bid".

I'm not sure that without the "best and final" situation, that same buyer might have gotten the house for less. The "selling process" might have gone on longer (presumably), and who knows who would have bought what, and when...?

RM
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Re: Who benefits from "best and final offer" on condo?

Post by FoolMeOnce » Wed Apr 25, 2018 12:22 pm

They may have also been so insulted that your initial offer was so drastically below your next offer, which itself was explicitly not your best offer, that they figured asking you to top the other buyer by a few $k was not worth it.

The takeaway here is that if you love a house, don't make the negotiation too much of a game. You want to get the house at a price with which you are comfortable, but you don't want to "beat" the seller at the negotiation. It is better to pay less, sure, but would you be happier offering a little more and getting the house? If so, do that next time.

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Re: Who benefits from "best and final offer" on condo?

Post by michaeljc70 » Wed Apr 25, 2018 12:30 pm

ResearchMed wrote:
Wed Apr 25, 2018 12:12 pm
michaeljc70 wrote:
Wed Apr 25, 2018 11:26 am
Dottie57 wrote:
Wed Apr 25, 2018 11:17 am
As a buyer, if I was in a bidding war I would drop,out.

I prefer the “best and final offer” over a bidding war where emotions can take over. But you really do have to give your best offer.
I drop out in either case generally. Either is an easy way to overpay. I've bought when it was a sellers market, but never where it was crazy like in some places you hear about like the Bay area where it might be unavoidable.

My last house I had 4 offers. I did best and final. List price was $700k. I got a last offers of $703k, $706k and $730k (one declined to participate). So, the $730k guy basically spent $23k more than they had to.
What do you mean that the "$730 guy" basically spent $23k more than they had to"?
Importantly, they had no way to know that, what the "next best" offer was, unless this was an "open" bidding like at a country auction for "stuff".
I meant exactly what I said. If they had bid $707k (all other things being equal), they would have gotten the house for that. Of course, I realize they didn't know what the magic number was going to be. That is why I don't like best and final (when I'm a buyer).

In my case, the market was not particularly hot, but it was nice house that showed well. I was surprised someone went that much over asking (I believe it was priced properly based on comparable sales). I think their agent told them if you really want it to go big.

unstartable
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Re: Who benefits from "best and final offer" on condo?

Post by unstartable » Wed Apr 25, 2018 1:46 pm

I was in a similar situation on a house that was just listed with an asking price near the market value of the home. We submitted an offer for the asking price. There was another bidder. We were asked again for a best and final, and replied with our original bid, stating it was best and final. We ended up losing, but the final transaction price was below our offer (probably due to additional negotiations after the inspection which are common in this area).

My opinion, is that this strategy is the best way to do it for the broker. A quick sale for the broker is in their best interest, even if the final transaction price isn't absolutely as high as possible. It may or not be best for the seller.

I am now glad that we lost that house, as I think we are much happier in the home we ended up buying later.

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Re: Who benefits from "best and final offer" on condo?

Post by quantAndHold » Wed Apr 25, 2018 2:12 pm

LiterallyIronic wrote:
Wed Apr 25, 2018 8:54 am
quantAndHold wrote:
Wed Apr 25, 2018 12:00 am
We sold a house in a hot market last year, and asked for best and final offers up front. All of the serious offers had escalation clauses written into the offer. It made it much easier to just pick the best offer so we could all get on with our lives. The winning offer ended up being escalated about $100k over their initial offer.

Is that not something that’s done in Boston?
Escalation clause? Is that something to the effect of "if anyone offers more than us by $X or less, our offer increases by $X"? Never heard of that. I've only bought one house, but we did put an offer in on one before the one we got. The asking price was $215, we offered $205, they asked for "best and final", so we offered $209. Then they still came back and said there was a better offer and asked if we could go to $212. We declined and told them that since it had been the requisite 48 hours since we offered the $209 and they hadn't accepted, that our offer had expired. I have no idea if there really was another offer or if they were playing hardball. But an escalation clause seems weird - either it's escalating just a few thousand and probably won't make much of a difference, or it would escalate a ton which means you were buying a house outside your price range, or you had a huge price range?
Yes, exactly. The winning offer on our house was something along the lines of, “$945,000, increasing in increments of $7,000, to exceed all other offers, up to a maximum of $1,050,000.” There were six offers on the house, and the three that were serious contenders all had clauses like this. The one we chose had the highest maximum, and the final escalated price was somewhere close to the top of that range. All of the serious offers had large down payments, had waived all contingencies, and were able to close when we wanted, so they were otherwise equivalent. Our criteria for choosing between the three was a combination of best offer financially, and what we thought would be the smoothest closing. The top offer had also practically turned the place inside out inspecting it, so we were certain they knew what they were buying. And their agent was super smart and easy to work with.

Incidentally, one of the couples that made an offer eliminated themselves by having an agent who was just an annoying person. None of us wanted to work with her, and we had other offers to choose from, so we didn’t really even read the offer.

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Re: Who benefits from "best and final offer" on condo?

Post by fantasytensai » Wed Apr 25, 2018 2:27 pm

bostondan wrote:
Tue Apr 24, 2018 11:05 pm
quantAndHold wrote:
Tue Apr 24, 2018 11:02 pm
For the seller, it isn’t entirely about money. It’s also about having a buyer and buyer’s agent you can work with. When they asked for best and final offer, they were asking for best and final offer, and you apparently didn’t believe them.

Would I have done it differently? Yes. But when both the top bidders are willing to escalate, this is a perfectly reasonable way to resolve it.
Does willingness to escalate need to be rapidly (like within an hour) resolved for the seller? This seems like an issue for the buyer, not the seller. Having two parties wanting to escalate seems like the exact problem a seller would want to have.

I still am not clearly seeing how this benefits the seller. I do see how it benefits the agent, just not the seller. Also, I think we were perfectly pleasant and waived all contingencies, so it’s not like we were being difficult to work with. The seller also wanted to do a leaseback and we said they could stay there as long as they liked.
From your responses, it's pretty clear that to you, money is everything.

To many other people it's different. Bidding wars take time, especially when the two buyers are equally hot headed and it starts to get personal. As a seller, I would want to avoid that situation as well, which is why I would also ask for a "best and final offer".

Putting myself in the seller's shoes, the best and final offer is a number. Not an equation. It is not 1.25 + what other buyer offers X 0.025. As a seller, I ask for one number, and that one number is what I look at when the offers are submitted. I'm not looking for a number plus a contingency. It is a matter of integrity. If you can't respect the instructions, don't complain when you lose the game.

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Re: Who benefits from "best and final offer" on condo?

Post by michaeljc70 » Wed Apr 25, 2018 2:42 pm

bostondan wrote:
Tue Apr 24, 2018 11:05 pm
quantAndHold wrote:
Tue Apr 24, 2018 11:02 pm
For the seller, it isn’t entirely about money. It’s also about having a buyer and buyer’s agent you can work with. When they asked for best and final offer, they were asking for best and final offer, and you apparently didn’t believe them.

Would I have done it differently? Yes. But when both the top bidders are willing to escalate, this is a perfectly reasonable way to resolve it.
Does willingness to escalate need to be rapidly (like within an hour) resolved for the seller? This seems like an issue for the buyer, not the seller. Having two parties wanting to escalate seems like the exact problem a seller would want to have.

I still am not clearly seeing how this benefits the seller. I do see how it benefits the agent, just not the seller. Also, I think we were perfectly pleasant and waived all contingencies, so it’s not like we were being difficult to work with. The seller also wanted to do a leaseback and we said they could stay there as long as they liked.
It benefits the seller in that if it was an open auction type of bidding, no one would bid more than $100 or $1000 more than the person that made the highest last bid. In best and final they don't know what will be the highest and may go way over what anyone else would have offered. In my case (above) I got $730k when the next highest bid was only $706k.

There is also nothing legally making them accept any offer even if they call for best and last.

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Re: Who benefits from "best and final offer" on condo?

Post by pshonore » Wed Apr 25, 2018 3:25 pm

michaeljc70 wrote:
Wed Apr 25, 2018 2:42 pm
bostondan wrote:
Tue Apr 24, 2018 11:05 pm
quantAndHold wrote:
Tue Apr 24, 2018 11:02 pm
For the seller, it isn’t entirely about money. It’s also about having a buyer and buyer’s agent you can work with. When they asked for best and final offer, they were asking for best and final offer, and you apparently didn’t believe them.

Would I have done it differently? Yes. But when both the top bidders are willing to escalate, this is a perfectly reasonable way to resolve it.
Does willingness to escalate need to be rapidly (like within an hour) resolved for the seller? This seems like an issue for the buyer, not the seller. Having two parties wanting to escalate seems like the exact problem a seller would want to have.

I still am not clearly seeing how this benefits the seller. I do see how it benefits the agent, just not the seller. Also, I think we were perfectly pleasant and waived all contingencies, so it’s not like we were being difficult to work with. The seller also wanted to do a leaseback and we said they could stay there as long as they liked.
It benefits the seller in that if it was an open auction type of bidding, no one would bid more than $100 or $1000 more than the person that made the highest last bid. In best and final they don't know what will be the highest and may go way over what anyone else would have offered. In my case (above) I got $730k when the next highest bid was only $706k.

There is also nothing legally making them accept any offer even if they call for best and last.
I would think a reasonable offer at listing price would entitle the agent to their commission whether the seller accepts it or not. That clause is in a lot of listing agreements.

ResearchMed
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Re: Who benefits from "best and final offer" on condo?

Post by ResearchMed » Wed Apr 25, 2018 3:29 pm

pshonore wrote:
Wed Apr 25, 2018 3:25 pm
michaeljc70 wrote:
Wed Apr 25, 2018 2:42 pm
bostondan wrote:
Tue Apr 24, 2018 11:05 pm
quantAndHold wrote:
Tue Apr 24, 2018 11:02 pm
For the seller, it isn’t entirely about money. It’s also about having a buyer and buyer’s agent you can work with. When they asked for best and final offer, they were asking for best and final offer, and you apparently didn’t believe them.

Would I have done it differently? Yes. But when both the top bidders are willing to escalate, this is a perfectly reasonable way to resolve it.
Does willingness to escalate need to be rapidly (like within an hour) resolved for the seller? This seems like an issue for the buyer, not the seller. Having two parties wanting to escalate seems like the exact problem a seller would want to have.

I still am not clearly seeing how this benefits the seller. I do see how it benefits the agent, just not the seller. Also, I think we were perfectly pleasant and waived all contingencies, so it’s not like we were being difficult to work with. The seller also wanted to do a leaseback and we said they could stay there as long as they liked.
It benefits the seller in that if it was an open auction type of bidding, no one would bid more than $100 or $1000 more than the person that made the highest last bid. In best and final they don't know what will be the highest and may go way over what anyone else would have offered. In my case (above) I got $730k when the next highest bid was only $706k.

There is also nothing legally making them accept any offer even if they call for best and last.
I would think a reasonable offer at listing price would entitle the agent to their commission whether the seller accepts it or not. That clause is in a lot of listing agreements.
I've never heard of this.
What is the definition here of "reasonable offer"?
Anything at/above asking price, regardless of financing issues or move-in dates... or negotiating after an inspection?

I can't imagine agreeing to this, or figuring out how "reasonable offer" would be defined.

RM
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