It is referred to as a BAFO in contracts for bids. And true to form, an offer to purchase a home is a written contract, or a bid to buy someone’s home. It is a phrase that sometimes surprises buyers, perhaps even, real estate agents. Why? For one of two reasons.
From an agent perspective, it requires that their client understands that in either of the above cases, their client has to weigh their options as to whether to increase their offer, hold firm to their previously submitted offer, or retract their offer all together.
Multiple Offers: Multiple Offers - Competing Home Offers
Competing With Other Home Buyers in Multiple Offer Situations
Of the two probabilities mentioned above, neither excludes the possibility that a buyer/seller will necessarily have the final advantage by taking such a position. In this discussion, we are focusing on the decision itself to make such a statement and the options that it presents. While either side can make this statement, for the sake of time, we will focus on the buyer who has been issued this challenge. The inverse would more than likely hold true for a seller, all things being equal. Here is what we need to consider:
A buyer who had submitted an offer on a house (whether in demand or that has been on the market for a long time) should be able to make a generally sound offer on a property that they are interested in purchasing. The buyer has done their homework, however deep, or superficially, their offer to buy is, for the most part, a sound offer. What may have happened is that the seller has some type of reason for not accepting the original offer and decides to counter. One reason for the counter could be the mortgage to be paid off, or the Return On their Investment (ROI) or, maybe, the seller is trying to get more out of the deal. We can’t always conclude that it isn’t any one of, or several of the reasons above. But, we know that the seller has countered. Sometimes a counter offer may lead to an extensive amount of negotiating back and forth. Sometimes the negotiating could last a week, depending on how many people are involved, or the terms and conditions that are being hammered out between the buyer and seller.
Many people are put off by the back and forth of negotiating terms, are often put off by even a counter offer. But for those who are willing to stick it out, it could be rewarding. But at some point all good negotiations have to come to an end. Someone ultimately decides that they have had enough, because their terms are rock solid, and that they are not willing to negotiate any further. Suddenly, let’s say for example, the seller decides that they have agreed to enough terms and conditions, and that they (seller) are getting less out of the deal for their property. The seller decides that if the buyer wants the property, and that if the buyer is willing, that the buyer should be willing to make their best and final offer. (This scenario is for explanation purposes only, your situations may vary).
In this instance, the buyer, having been given this challenge to make their best and final offer, has to decide on how much they are willing to give away from their original offer. For many of those in this position, they may see this as a challenge to their serious ability to purchase the property, and may try one last ditch effort to get as much out of the deal as possible. So they, in fact, make their best and final offer. The outcome varies. There are no statistics on this that I can find. But for those who make the effort, they have no reason to be ashamed if their best and final offer is not accepted. The process of negotiating is a brutal one. One burns many brain cells trying to get to that ultimate bottom line.
On the other hand, the buyer, having received the challenge to make their best and final offer, may feel intimidated, or offended. After all, things were going well for the last week r so of negotiating. Why would the seller pose making the best and final offer at this point of negotiations? From the buyer’s point of view, it could be a case of asking too much of the seller, and now the seller is pulling back. Or, the buyer could feel that the seller is trying to push them aside in order to get to another deal. This phrase, in its entirety, suggests so many things within the process of negotiations, and yet, it simply means one thing: Make your best and final offer.
Whenever on the receiving end of this challenge, the buyer should not feel compelled to offer more than their initial offer. Sometimes, it could be a gimmick, or a trick to get a buyer to offer more. But if the buyer has done their homework and research, they should know that they have already made a great offer. If for example, the buyer offered $100,000 from the beginning, and eventually find that through the negotiating process that they are at $25,000 or more above where they first started, maybe revisiting why the $100,000 was not a bad offer to begin the process should be considered.
Last but not least, if facing the challenge of making your best offer after some time of negotiating back and forth, step back from the negotiations for a while. You usually have a deadline in order to respond. Use that time. Don’t respond too quickly. By stepping back, especially as a buyer, you give your mind an opportunity to think, and re-think about how you structured your offer in the first place. The end result will not necessarily guarantee that you make a successful purchase, but when all is said and done, you should be able to walk away from the negotiations secured in the knowledge, that you made your best and final offer.