You’re so excited you have an accepted offer on your first choice of a house. You are happily moving forward doing exactly what your broker is telling you. And then the dreaded phone from your broker –there is another offer on the house you want and the seller has instructed you to put in your highest and best offer.
What does this mean?
First and foremost understand that, for sellers, there are different ways to look at and negotiate offers. To the seller, the highest price isn’t always the best offer. We always instruct our clients to always look at the package of the offer that is presented to them, and not just the price.
The seller has several choices how to handle a higher offer once they’ve already accepted a lower one:
1) They can stay with the first deal and keep the second offer as just a back up offer.
2) Assuming the second offer is higher than the first, they can ask the original buyer if they would match the increase.
3) They might ask both buyers to give their final and best offer.
So back to the original question: what is a “final and best offer?”
Both parties are simply asked to give their final offer. A final offer will show the seller the highest and best offer they can get for the property, essentially streamlining the “bidding war” process. The offer should be in writing, with a pre-approval if you are financing, or proof of funds letter. There should be a deadline to present the offer which both parties must adhere to.
Once the seller has this information, they will make a decision on which deal is the best for them and all other offers will remain as a back-up plan.
Before submitting a final offer, be sure to discuss with your broker and your seller what will happen if another offer comes in after you’ve submitted your highest and best? Will this create a bidding war?
At the end of the day, your broker will be your best source of answers and clarification. Although everyone practices real estate slightly differently, trust your broker to guide you through these situations.
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