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Counter Offer Meaning and How It Works During Negotiations

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how do counter offers work in real estate

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Counteroffers are a common part of the negotiation process, and typically occur when the seller responds to a buyer’s offer with some form of modification. These adjustments are typically related to pricing but can also be changes to closing dates and other relevant contingencies.  

This article will provide you with the essentials to navigate counter offers effectively, so that you can respond strategically.If you’re looking for a streamlined buying or selling process, iBuyer.com can provide quick, competitive cash offers so you can avoid the hassle of traditional negotiations. 

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What is a counter offer in real estate?

When a buyer is interested in a home and wants to purchase it, they make an offer on the home, typically with the help of their real estate agent. In this scenario, the seller has three options:

  • Accept the offer without making any conditions or changes
  • Present a counter offer
  • Reject the offer and continue looking for a buyer

If a seller is interested in negotiating with the buyer but rejects the offer they initially made, they can make a counter offer. Counter offers pretty much always deal with three main factors: convenience, price, and timing.

In the next section, we’ll take a look at these factors and what they mean in greater detail.

How do counter offers work in real estate?

It isn’t uncommon for there to be some back and forth in the negotiation process when buying or selling a house. When you make an offer on a house, there is a good chance the sellers will counter unless the market is heavily weighted towards buyers.

When a seller makes a counter offer, the changes are typically in regards to certain aspects of the offer. Let’s take a look at some of the common components of counter offers.

Sales price

The most frequently contested part of a counter offer is the sales price. There are two common ways that sellers will counter in this regard.

First, a seller might counter with the original asking price. This indicates that they aren’t willing to negotiate on the price.

In the second case, a seller might counter with a price that falls between the asking price and the buyer’s offer. This indicates that the seller is willing to negotiate. The buyer can make another counter offer or they can accept the proposed price.

Closing costs

Sometimes, a buyer will request that the seller helps to cover the closing costs. However, this is much more common in a buyers market. The seller might agree to put a certain amount of money towards closing or they might simply say no.

Closing date

The original offer will propose a date for the closing. A seller might make a counter offer if they would like to have the closing happen on a different date. For example, they might need more time to move out of their house and request that the escrow period is longer than stated in the initial offer.

Earnest money deposit amount

Buyers typically put down an earnest money deposit to show you that they clearly intend to purchase your home and that they have cash on hand. Sellers are motivated to have larger deposits because it indicates that the buyer is more likely to follow through, as they have more at stake.

Buyer-requested contingencies

There are standard contingencies in home offers, such as appraisal, inspection, financing, and title contingencies. Sellers don’t usually fight these contingencies unless they have a significant amount of leverage.

However, some buyers will put a home sale contingency in their offer. This means that the purchase of your home is contingent on their ability to sell their own. Sellers might push back on this and try to negotiate with a kick-out clause or other methods.

(Would you rather avoid this lengthy negotiation process entirely? If so, you might be interested to learn more about what iBuying is and whether or not selling your home to an iBuyer is the right option.)

How does a seller or buyer accept a counter offer?

When both the buyer and the seller have reached an agreement, they will both have to sign the contract. These days, this commonly occurs using an online electronic signature tool. In order to lock in the offer, this needs to happen immediately as offers typically expire.

When should you accept a counter offer?

You want to be ready to move quickly if the seller issues a counter offer. Counter offers usually have an expiration date, just like the purchase offer you made.

There are a number of things you will want to consider before accepting a counter offer, though. While price is often the first thing people look at, it’s not the only important part of the counter offer. You will want to look at any changes that were made to the timeline, contingencies, or closing cost payment agreement.

It’s important to never let negotiations get impacted by your emotions. For buyers, they can get emotional if they are convinced that the property is their dream home. Sellers can become emotional when they feel offended by a low-ball offer or other parts of the offer.

(Are you hoping to sell your house fast? Check out this article.)

What should you do if the seller rejects your counter offer?

It is not required that sellers reject an offer in writing. The listing agent might choose to tell the buyer’s agent that the seller isn’t going to respond because the offer isn’t acceptable. The seller can also return the offer writing “rejected” across the face with the date and their initials, and there is often also a spot where sellers can deny the offer on the contract.

During this stage of buying a home, your best resource is your real estate agent. They will be able to talk to the seller’s agent and find out what it is that the sellers find most important about the home sale. They might not want to make repairs, they might be firm on their price, or they might have a move out date that is set.

Can the seller counter above asking price?

It might sound strange, but in some situations, the seller can counter above the asking price. This would only be justifiable in certain situations.

Usually, this only works when sellers have received multiple offers. This is more likely to work in a seller’s market and less likely to work in a more balanced market or a buyer’s market.

It’s important to understand that countering at a higher price can be risky if you aren’t sure that the property will appraise for that amount. The buyer otherwise won’t be able to be their financing approved and the deal could fall through entirely.

Can you withdraw your counter-offer?

If you are making multiple counter offers at a time, you don’t want to counter anything in writing but you do want to send out a multiple-offer disclosure. Counter offers, instead, are made verbally.

This way, the first buyer who gets back to you with terms you like can enter a contract with you.

Basically, this means that you can withdraw a counter offer. But, the counter should be verbal and not written and you should make sure that your agent is doing everything right to allow you that option.

(Are you wondering whether you can sell your house without making any repairs or changes? Learn about selling your house as-is here.)

Can the seller make a counter offer when the initial offer was full price?

If you make an offer at the full asking price, it’s reasonable to expect that the seller won’t counter on the basis of price alone. Normally this wouldn’t happen unless the market was heavily favoring buyers and the seller had multiple offers.

That being said, it’s not uncommon for a seller to counter on other aspects of the deal.

Can the seller issue multiple counter offers to a number of different buyers?

If a seller receives multiple offers, they can verbally make multiple counter offers. However, they need to be careful in doing so. It’s important to carefully follow the law when it comes to how you can navigate making a number of different counter offers.

In this scenario, the seller will not want to give any written counter offers. In some states, the buyers must be told in writing that the seller is considering several different offers. In other states, the law does not require sellers to inform buyers that there are a number of different parties involved.

Sellers do need to be somewhat careful doing this. Buyers could find the situation too risky and look elsewhere for a more predictable deal.

Responding to a counter offer

Whether you are a buyer or a seller, you will want to carefully review each and every aspect of a counter offer. No matter how many times you and the other party go back and forth negotiating, you will want to read every detail before you sign anything.

It’s important to understand what your limits are before you start negotiating. If you are the seller, decide what points of the agreement you are willing to negotiate on and which you are firm about. For example, you might not have any room to budget when it comes to your move out date, but you might find that you are willing to come down on the price a little.

If you are a buyer, you will want to think about what your maximum price is. It’s easy to get emotionally attached when you are shopping for a home. In a competitive market, it’s not uncommon for individuals to end up with buyer’s remorse because they felt so rushed to make a very large financial decision.

It is definitely worth consulting with your real estate agent during this process. Negotiations can be difficult and stressful, and having a professional agent to help you understand the offer and make a counter offer can make a world of difference.

Are you ready to sell your home?

Selling your house can feel like a never-ending process. First, you have to get your house ready for the market by cleaning, painting, landscaping, and making repairs. Your home will likely be staged for photographs and showings, and your life is constantly interrupted by people viewing your home.

You’d think that it would be smooth sailing once you get an offer on your house, but unfortunately, that’s far from true. Once you get through the negotiation process and accept an offer, there are many more steps before the sale is final.

Understanding the answer to questions like “how do counter offers work in real estate?” can help you get a sense of what it’s like to sell a home. For people who aren’t interested in this lengthy endeavor, there is another option.

Selling to an iBuyer is a quick, stress-free process. If you don’t want to deal with the normal headaches of selling a house, this is a reasonable path to consider. You can find out the real value of your home and get a no-obligation cash offer here!

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