2008 May 9th

When “Final and Best” is Neither

Beware When Buying a Condo in Hoboken – Final Doesn’t Always Mean Final

The Hoboken condo and real estate market is still reasonably strong and a surprising number of Hoboken condos and brownstones elicit multiple offers. When this happens, the listing agent can handle them in two basic ways:

Competing Bids Can Cause Chaos or Worse

With competing bids, the buyers bid against each other until the seller accepts one offer and says “stop – no more showings, no more offers”. Very often the seller will play one buyer against the other to keep outbidding each other to get the highest price. This strategy backfires when both buyers get frustrated and walk away. Occasionally a seller will accept one buyer’s offer, sign contracts and begin attorney review with that buyer. Then an even higher offer comes in, possibly even after the the end of attorney review when the sales contract is supposedly binding, and the seller will dump the first buyer or try to get the first buyer to top the bid again. This results in hard feelings, a disgruntled first buyer and may even end in a law suit.

The idea behind “Final and Best” is for the seller to be as fair as possible to everyone. The listing agent tells the buyers’ agents that each buyer should present their “Final and Best” by a certain deadline. The seller will then select which offer is most attractive and move forward with that buyer. “Final and Best” is supposed to avoid tangled mess of multiple bidders trying to out bid each other. It is often presented to the buyers as a way to “level the playing field”.

As They Say in Latin, Caveat Emptor – Buyer Beware!

Even when the seller’s agent says they are doing “Final and Best” in the end, it’s often entirely meaningless. Well how can that be, you may wonder? Here is a comon scenario:

So much for “Final and Best”. Now, of course, there are some sellers with a sense of fairness that actually superceeds their greed. Upon having committed to a buyer, they will not entertain any further offers, even if higher than the accepted one. Buyers should remember, though, that just because the seller represents that they are doing Final and Best, it may be neither.

When is a Deal a Deal?

So when can a buyer relax and know that they’ve bought the property? At closing, of course. Prior to closing buyers should keep in mind that anything can and does happen. During attorney review, the contract is not even binding. The risk to the buyer is greater before buyer has put any money on the table. Once buyer has paid the initial deposit, done the inspection, obtained and delivered a mortgage commitment, the risk lessens. Chances are, the property is no longer being shown. In fact, a smart buyer will make a term of the offer be that upon acceptance of the offer the property is taken off the market. The more time that goes by, the fewer other buyers there are likely to still be floating around. But regardless of what the contract says, a seller can still change his or her mind and the buyer’s only recourse is an expensive lawsuit. We all know that when that happens, it’s the lawyers who win.

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  1. Keahi Pelayo

    Terrific advice.
    Aloha,
    Keahi
    RE/MAX 808 Realty

  2. Lori

    Thanks Keahi. How is the market in Hawaii doing?

  3. Susan Hilton - Texas Aggie Realtor in College Station Home Sales

    Loved the article and REALLY enjoyed reading you are beginning to see your market do a little better! Multiple offers is always a good thing in the real estate market.

    Susan Hilton – Realtor & Sales Trainer for Century 21 Beal, Inc. #1 in Real Estate in Bryan and College Station Home Sales – Bryan College Station Real Estate & Community Blog

  4. Tiger

    You are the best Lori thanks!!! I actually took a tip from a previous post of yours and insisted on ‘no further showings’ of the condo while we were under contract a few weeks ago, I’m glad I did because I had my heart set on the place as soon as I saw it, I would have been extremely disappointed if someone else took it from me.

  5. Diana S

    Do you think that new construction in Hoboken is inflated right now due to rising hard costs? I see so many new condo buildings going up on the west side and they are marking upper $500, lower $600. It seems overpriced, espcially the amount of noise/traffic in the area, bad roads, underdeveloped ammenities and general location.

  6. Diana S

    In other words, what do you think should be a fair value for condos, say, downtown Jackson or Jefferson?

  7. Lori

    Diana,
    While location is certainly one of, if not the most important factor in real estate value, every property is unique and I simply cannot give a blanket value. The properties that are priced right sell. Those that don’t sit on the market until the price is sufficiently reduced. That is probably a good guide. Also, see what other similar condos in the building or close by have sold for. Hoboken is, in the end, a small town and there is demand for units in all parts of town. Do you have a specific building in mind?
    -Lori

  8. Stephen Wolfe

    It is so good to hear someone else admit that “highest and best” or “final and best” doesn’t mean that at all. We have had about 2 or 3 or these in the past few weeks and I have started questioning listing agents on in they understand what that really means or if they are just trying to run up the price. Why can’t we just say.. “There are competing offers, do you want to change yours at all to put in a better place?” That seems a lot more honest to me.

  9. Lori Turoff

    Stephen,
    When I am working with a buyer, I ALWAYS strongly advise them when making their initial offer to do the following:
    1. Offer the best price you can, hopefully full price if the property is priced correctly;
    2. Make the offer as soon as possible – you really want to be the first one in there;
    3. Ask the seller to take the property off the market. They are the ones in control and they decide if it will continue to be shown; and
    4. If they refuse, ask them that all further showings be for back-up only. In otherwords, should your deal fall through, the seller has someone waiting in the wings.

    In most situations, if you come in with a strong, quick offer the seller is willing to agree. Then, when other agents call the lising agent to make a showing appointment the listing office should tell them “there is an accepted offer and we are in attorney review – all showings are only for back up – would you still like to show it?” This discourages many agents from even bothering to show it to their buyers. With so many properties on the market, why waste time with one that’s already under contract?

    Furthermore, when I do this, I might even have an agent in my office call the listing office to make an appointment for the property to see if they are telling agents that the property is under contract. If not, I immediately call the listing agent to find out why he or she is not holding up the agreement.

    Of course, anything can still happen but when it is set up right from the get-go it is less likely that there will be problems. Ultimately, it depends on the ethics of the seller to keep their word.

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