When sellers believe there is sufficient demand for their home, they may ask potential buyers to submit a ‘best and final offer’. Also referred to as sealed bids, this is intended to secure the highest possible price in a fairly active market.
We take a look at best and final offers and answer some of the questions we are asked about how the process works.
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Requesting a best and final offer is a seller’s tactic to try and encourage high offers on a property. The usual process is that an estate agent will advise potential buyers to make their offer by a certain date.
This avoids the need for the seller to enter into negotiations with multiple purchasers. It is hoped that each buyer will offer the highest amount they are prepared to pay and the seller will be able to select the purchaser they want. The seller might also consider issues other than price, such as how quickly you are able to proceed, whether you have a mortgage arranged and whether you have a seller for your own property, if you need to tie in a sale.
Because the bids are not generally revealed, you will not know how much other parties are offering and the idea is that there will only be one chance to make an offer. The agent may be prepared to let you know if the seller has received earlier bids, to give you an idea of the offers that have been refused.
As well as looking at how much you can realistically afford and making sure you do not overstretch yourself, you can do some market research. Check what similar properties have sold for recently and have a look at whether property prices are rising or falling. This can be particularly important if you are not tying in a sale.
Although you might be prepared to make a high offer for a property you have fallen in love with, try to think carefully about whether this is wise. You could regret overpaying and end up wishing you had waited for a different and better value property. Your lender may also have concerns if you offer substantially more than the property is worth.
The seller is not obligated to accept any of the offers but in reality they are very likely to pick the one that suits them best. So even if your offer is the highest, you are not guaranteed to be chosen. Other issues may be important to the seller, such as moving quickly or selling to someone who is chain free.
To give your offer the best chance, you should make sure that you have taken the following preliminary steps:
While the process is intended to encourage buyers to make their highest offer, there is nothing to say that you cannot make another offer. Estate agents are legally bound to pass on any offer they receive. If you increase your offer, the seller may decide to switch to you if they want your higher sum, particularly if there are other benefits in choosing you, for example, if you have a buyer in place yourself or you are chain-free.
Offers in conveyancing are not legally binding and the seller is only legally required to sell once contracts have been exchanged.
This means that the seller could pull out at any time or choose to go with a higher offer made after the best and final offers process has ended. While this might seem morally wrong, if thousands of pounds are on the table some sellers will opt to take the higher offer.
Similarly, it does mean that you can also pull out at any stage up to exchange of contracts, should you wish to.
It is also open to the parties to renegotiate the sale price. For example, if you have a survey carried out and you discover that work is needed to remedy defects, you can reduce the amount of your offer. The seller may accept the new price or they might negotiate with you to agree on a reduction that is acceptable to them. There is a risk they might pull out, but they are likely to experience the same issue when a new buyer has a survey carried out, so it might be in their best interests to negotiate.
If you are selling your property, your estate agent will be able to advise you on whether asking for best and final offers is recommended for your situation. This will depend on how lively the property market is and the level of interest they have received for your property.
They will take into account how sought-after similar properties in the area have been and how many potential purchasers they have waiting for a home like yours.
Asking for best and final offers can speed matters along, encouraging potential buyers to make their offer by the set date and giving you the opportunity to choose the offer that is right for you, which might be from someone who can proceed quickly, even if theirs is not the highest offer.
If the market is not particularly favourable to sellers, you might want to stick to the normal process of receiving offers and negotiating to try and secure a higher sum.
If you are thinking of buying or selling a property, we would be happy to represent you.
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