A property is placed on the market for what seems like a reasonable price– wow, “a reasonable price” in today’s market is just not that common. Is this a deal or what? You write a full price offer to find that there are multiple offers on the property, some at full price and some even more than the asking price; not surprising. The seller’s response is to let several buyers, obviously the highest of offers do a complete walk thru of the building, provide each buyer walking thru a complete due diligence package including the preceding 12 months income and operating expenses, rental agreements, vendor contracts, receipts for repairs, utilities, etc. and if applicable the loan information. It’s now up to the buyer to come back with your best and final offer. Naturally, the property is being purchased as is where is with all faults and any existing conditions without any contingencies, warranties and/or guarantees from the seller and all representations made on behalf of the seller by agents, managers or employees (by the way purchasing “ as is” is very common in this market and with most sophisticated buyers).

Now, you’ve driven by the building, know the area, like the area and own other like kind properties. You may not even be that concerned about the interiors of the units; you just assume that every building needs a certain amount of work and from the exterior inspection it’s visible that this property needs work. Isn’t that what everyone is looking for; a deferred building in a good location with the opportunity to add value? Even though regardless of the condition of the building and what’s going on in the interiors, you know you want this building and quite frankly you’re even willing to pay more than your original full price offer. You should still make a complete walk thru of this building because remember you are buying “As Is” without any contingencies or warranties whatsoever.

Now for your “best and final” offer. You’re in a situation now of bidding against yourself. Best and final really means your best and final, sharpen your pencil and really come up with your bottom line. Don’t be cheap; this is not the time to lose a deal because you were being too frugal. Needless to say, you do not know what the other offers are at and quite frankly the other buyer’s motivations should not concern you. The bottom line is your bottom line “what is the most that you are willing to pay for this building?”

Submit your best and final offer with the understanding that several things may happen. You may not get the building, somebody else obviously offered more. You may even experience that after your best and final that the seller has the “hootspa” (nerve) to counter your best and final with even more! The seller may be playing to see how much more can be achieved. Finally, you just may be the best and final and that’s the final that’s acceptable to the seller and your price has been accepted. Naturally, your immediate response is “Oy Vey” I’ve offered too much, I should have offered less.

Best and final puts the buyer in a situation where there are two outcomes. One is where your offer is not the best and final and you may end up kicking yourself saying “I should have offered more,” or you may be the best and final and then you’re saying “I’ve paid too much!” As a buyer the best possible place to be is to be completely comfortable (which is challenging) with your best and final with the understanding that it is a roll of the dice (so to speak) and if it is refused and you are not the procuring cause (the actual buyer) to know that this was your bottom line. Should your best and final actually be the offer that is ultimately accepted, also try to be comfortable that this is in fact what you were willing to pay.

Now let’s look at the seller’s prospective. The property is put on the market ideally at the fair market value; however in this “maschugana” (crazy) market, it’s difficult to know what really is fair market value. Needless to say, we can look at the comparable sales where the typical barometers of gross rent multipliers, cost per unit and cap rates, are still used for comparison purposes only but are no longer indicators of what makes “economic sense.” We also compare price per square foot of the building, the rental rate and the site itself.

When a property is truly priced right, ultimately what will happen is that as soon as it hits the market (and that means full market exposure not just exclusively shown to the listing agent’s buyers) that offers will immediately come in. These offers are often not only at the listed price but perhaps even more. An obvious and very natural response from a seller who may be overwhelmed with the responses is that the property should sell for even more. This is where the response of Best And Final Offer serves the seller well. Naturally, the seller also can get too caught up in the cycle of “I can get even more” and ultimately lose some very qualified and full price buyers by going back with further counter offers just to “make sure” that this really is the best price. It’s easy for both buyers and sellers to get caught up in this cycle; the buyer just has to be the procuring cause at no matter what the cost and the seller may be fearful that he’s letting the property go for too little. This can become a gamble for either side; the buyer may be going above his bottom line and the seller may get caught up in the frenzy and lose buyers in the process. At the end of the day the seller may remain contemplating “I could have gotten more” and the buyer may remain contemplating “I could have paid less; but after achieving the best and final offer at the seller’s price and terms, a smart seller who is in fact a real seller should have some confidence that the property was priced right and the buyer who may naturally feel that it could have been bought for less can also know that this is in fact what the market will bear.