What Is a Best and Final Offer?
A best and final offer in real estate is a prospective buyer's last and highest offer for a property. The best and final offer is typically submitted in response to a bidding war. A seller who has received several offers will ask all bidders or the top bidders to submit their best and final offers rather than trying to negotiate individually with each bidder.
The term is also used in government contracting. An agency will ask bidders to submit their last and final offers so that the least expensive and most favorable bid can be accepted for the project.
- In real estate, a best and final offer is the prospective buyer's last and highest bid.
- In government contracting, it is a prospective contractor's last and lowest bid.
- A best and final offer may contain concessions or sweeteners unrelated to price.
How a Best and Final Offer Works
The best and final offer in a real estate bid is the most favorable terms the buyer is willing to offer the seller for the purchase of the property. A seller who receives multiple offers will resolve the situation by asking each bidder to submit only one offer that represents their best and final offer.
In government contracting, a best and final offer is a response to a contracting officer's request for final bids for a particular public project. Best and final offers are submitted during the last round of negotiations.
A request for last and final offers can lead to a better price for the property.
Motives for Best and Final Offers
Government entities are frequently mandated to choose vendors and suppliers who offer the lowest possible prices for the requested services and products. The manager of the procurement process is still permitted to weigh other factors such as the reliability and competence of the vendor in addition to the final offer price.
In real estate, a request for best and final offers may cut short the negotiating process while also increasing the purchase price and cutting down on any concessions that might be sought by the buyer. The prospective buyers have effectively been informed that there are other interested parties and the offer most advantageous to the seller will win.
If the seller of the property is not satisfied with any of the bids after asking for best and final offers, they might choose one of the prospective buyers to negotiate terms for a price closer to the target.
In some very hot markets, sellers have accepted a high bid only to turn around and accept a new bid from one of the losers in the bidding war.
The buyer who gave the winning best and final offer may also withdraw the bid. This may be because of new information that became available about the property or questions about the bidding process including whether or not there actually were other bidders driving up the price.
In such cases, the seller may choose the second-best offer.