So you’ve finally found the home that checks all your boxes, and you’re ready to negotiate the purchase price. Usually, you make an initial offer, the seller counters, and then the negotiation ends with your final counteroffer. But if you’re dealing with a desirable NYC property in a competitive market, it’s not always that simple — most notably when there’s a bidding war. And just when you think you’ve lost the place, the seller’s broker will suddenly ask for your best and final offer to weigh against other buyers’ bids. What does best and final offer mean? And how do you determine yours? It’s tricky, but we’ve got some tips to help you through it.

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    What to Know Before Making Your Initial Offer

    The listing price of a home is not always the exact market value of the home. But how do you know whether to bid high or low? Listing agents often price below the market rate to attract more buyers and potentially start a bidding war, says Polly (HuiWen) Milligan, a real estate agent at Douglas Elliman. Or, listing agents will price the home above the market rate, expecting buyers to bid lower. Both are common pricing strategies.

    To determine whether the home is priced above or below the market rate, you can look at comparable properties and how they are priced. StreetEasy is a great place to do so — just use our many search filters to find homes that are similar in type (co-op, condo, townhouse, etc.), neighborhood location, number of bedrooms and bathrooms, square footage, amenities, and any other defining characteristics of the home you’re bidding on. You can also use StreetEasy’s Data Dashboard to look at location-based stats like median asking price, sale price to list price ratio, the StreetEasy Price Index, and more.

    You want your best and final offer to be close to the price the seller wants, within reason.

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    A buyer’s agent can help you with your best and final offer by providing insights on pricing.

    Factors to Consider Before Bidding on a Home

    Now that you’ve looked at comparable properties, it’s time to consider your offer. 

    If the apartment has been on the market for a while or it’s a fixer-upper, you may be able to bid below the asking price. Even your best and final offer could wind up under the asking price. But you don’t want to lowball too much, either. The lowest you should go is 10% below the asking price, says Milligan, if you want your offer to be taken seriously.

    Is the apartment a condo or a co-op? This, too, can affect how much leeway you have in terms of your bid. In NYC, there is a much smaller inventory of condos than co-ops. As a result, you typically can’t offer a penny less than the asking price. “It’s a matter of supply and demand,” says Armen Meschian, an associate real estate broker with CORE. 

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    How to Make Your Best and Final Offer Appealing

    Getting the home is not just about making the highest offer. What you bring to the table is key, especially in a bidding war. Here are a few ways to prepare:

    Calculate Your Debt-to-Income Ratio

    Obviously, it would be best if you didn’t bid more than what you can comfortably pay. Most co-op boards prefer your monthly debt-to-income ratio to stay below 30%. You can find your DTI by dividing your monthly debt payments by your monthly gross income. When you make your best and final offer, be sure not to exceed this ratio.

    Share What’s in Your Bank Account

    In addition to your proof of income, sellers and co-op boards also want to see that you have savings.

    “Both sellers and co-op boards like to see some reserves,” says Meschian. “They want to know that people won’t be completely tapped out after the purchase.” 

    While showing you have lots of cash in the bank is great, there are mitigating factors. As Meschian points out, a stable income stream can compensate for smaller reserves, especially in an unstable economy. So a tenured professor with modest savings could actually be more attractive to a seller than a buyer with higher reserves who just started a job at a high-risk startup company. Sellers — and ultimately, co-op boards — will factor this in when evaluating your best and final offer. 

    Up Your Down Payment

    The more you can put down beyond the minimum required, the better. But again, keep the balance of your DTI and reserves in mind. You don’t want to put down so little that your DTI will be huge, nor do you want to put down so much that you have no reserves. Aim for a happy medium in your best and final offer.

    Write a Letter to the Home Seller

    Including a letter in your offer can be a great opportunity to stand out. A letter puts a human face on a packet of numbers and stats. Both the seller and co-op board will appreciate seeing the enthusiasm and a desire to reside there long-term, so it’s important you drive those points home. And be sure to mention if you have dependable employment — for example, if you’ve been at your company for 10 years. The board will want to see that you have longevity and stability before accepting your offer. Be careful with this strategy, however, as it can be risky.

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    Best and Final Offer Tips

    No matter how much your heart is set on an apartment, Milligan cautions against bidding more than 10% above the asking price for your best and final offer. Many buyers err by focusing on the purchase price, and whether they can afford the home right now, Meschian said. But many other factors come into play when considering how a home might resell in the future if you put it back on the market, including policies about pets, subletting, or flip taxes.

    “Even if you are comfortable with the policies, this may not hold true for buyers later,” says Meschian. For example, restrictive sublet or pet policies could drastically shrink your potential buyer pool. That means if you bid significantly above the asking price, your offer could be vastly overpriced and work against you in the future. 

    While it can be disappointing to lose out on an apartment that feels like home, you want to stay within reasonable boundaries. No apartment is worth paying more than you can afford, especially if it won’t have long-lasting value. Following these guidelines will help set you up for success in making your best and final offer.

    Lastly, a skilled buyer’s agent can help you come up with a winning bid that works for you. Agents who are part of StreetEasy’s Experts Network, in particular, will have verified experience helping buyers like you purchase homes similar to the one you’re seeking. Connect with the StreetEasy Concierge for buyers below to be matched with the best Expert for you.

    Find the ideal buyer’s agent for you

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    Disclaimers: StreetEasy is an assumed name of Zillow, Inc. which has a real estate brokerage license in all 50 states and D.C. See real estate licenses. StreetEasy Concierge team members are real estate licensees, however they are not your agents or providing real estate brokerage services on your behalf. StreetEasy does not intend to interfere with any agency agreement you may have with a real estate professional or solicit your business if you are already under contract to purchase or sell property.

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    StreetEasy earns a referral fee from successful Experts’ transactions, at no cost to the buyer or seller. Experts must meet StreetEasy’s standards of service and market expertise. Agents in our Experts Network have closed deals on homes similar to the seller’s or similar to homes the buyer is searching for. We measure their performance to make sure buyers and sellers get top-notch service.