What Is A Counteroffer In Real Estate?

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Whether you’re buying or selling a house, a counteroffer is a real estate procedure you should familiarize yourself with. Negotiations are common in real estate transactions, and when you’re buying or selling a financial investment, you’ll want to make sure you’re getting the best deal possible.

Learn exactly what a counteroffer means, how a counteroffer works in real estate and tips for either accepting or rejecting a counteroffer.

Counteroffer Meaning

A counteroffer in real estate refers to a negotiation between two parties. Typically, the buyer will initiate a counteroffer after seeing the original offer on a home. The seller then has the opportunity to counter their offer or accept or reject the offer. If the seller chooses to counter the offer, the buyer will then have the same opportunity: They can counter, accept or reject the offer.

It’s important to note that this type of negotiation can go back and forth between the parties for a long period of time. This is why working with a real estate agent can help – an agent will handle these negotiations for you and guide you in the right direction.

Reasons To Counteroffer

There are several reasons why someone would make a counteroffer during a real estate transaction. If you’re buying or selling a house, these reasons may include:

• Changing the asking price: A buyer may ask to lower the asking price, but a seller may counter with the buyer and eventually agree on a mutual purchase price.
• Negotiating the terms: You can negotiate more than just the asking price with a counteroffer. You can negotiate contingencies (inspection or appraisal), the closing date, any repairs and renovations or concessions.
• Reflecting the market conditions: Some counteroffers are based on the current real estate market. If it’s a seller’s market, the seller may raise their asking price, but in a buyer’s market, a potential home buyer might counter with a lower price.
• Offering flexibility: A counteroffer can be a great way to express to the other party that you’re flexible on the terms. For example, to make the listing price more attractive, the seller may allow the buyer to move in at an earlier date.
• Establishing a middle ground: Counteroffers allow both parties to meet in the middle. Once negotiations are settled, a counteroffer can establish a middle ground between what the seller and buyer both want.

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Tips For Buyers Making A Counteroffer

If you’re going through the home buying process and have finally found the type of home you like, be prepared to potentially make a counteroffer if the terms aren’t exactly what you had in mind.

Here are a few tips on how to make a counteroffer as a buyer:

1. Negotiate the purchase price. If the asking price is too high for you to make an offer, consider negotiating the purchase price with the seller by offering them a quicker closing date.
2. Increase the earnest money deposit. An earnest money deposit is also known as a good faith deposit. If you increase this deposit, you’ll show the seller you’re serious about buying the property.
3. Ask the seller to make repairs. If the seller is adamant about keeping the asking price the same, consider asking them to make any repairs or renovations before you move into the home.
4. Have the seller pay closing costs. When making a counteroffer, you could ask the seller to pay a portion of the closing costs.

Tips For Sellers Accepting Or Rejecting A Counteroffer

When dealing with multiple offers as a seller, it’s important to know what to consider in each scenario.

Accepting A Counteroffer

If you’re thinking about accepting a counteroffer, make sure you respond quickly to the potential buyer. Buyers could have offers on multiple homes, so the sooner you accept the counteroffer, the sooner you’re able to sell.

Here are a few tips on accepting a counteroffer when attempting to sell your home:

1. Review the terms. Go over the offer and see if it aligns with what you ultimately want when selling your home.
2. Consult your real estate agent. Talk with your real estate agent about the counteroffer and get their insight if anything needs to be adjusted in the agreement.
3. Look at comps. Make sure the counteroffer is reflective of real estate comps in the area, as well as the real estate market.
4. Negotiate if needed. If anything in the counteroffer needs an adjustment, always negotiate before accepting the offer.

Rejecting A Counteroffer

Although you don’t have to legally respond to a counteroffer if you choose to reject it, it’s important to stay professional and communicate with the buyer why you’re turning down their offer.

Here are a few tips on how to reject a counteroffer when selling your home:

1. Explain your decision. Provide the buyer with the reason you’re choosing to reject their counteroffer.
2. Be transparent and professional. It’s important to maintain a professional manner during this transaction. Make sure you’re transparent when communicating and always be respectful, even when dealing with lowball offers.
3. Communicate any future negotiations. If there’s room to negotiate in the future, make sure the buyer knows so they can potentially make another offer on the home.
4. Continue to market your home. If you’re rejecting a counteroffer, make sure your home sale remains active. This will increase your chances of multiple offers.

Real Estate Counteroffer Example

For a better understanding of a counteroffer, here’s an example.

Buyer’s Offer

Seller’s Counteroffer

Purchase price:

Closing date:

90 days after accepted

60 days after accepted

Inspection contingency:

Financing contingency:

Seller covers:

$2,500 in repairs

$2,000 in repairs

Using the example above, let’s say the original purchase price was $325,000 with a closing date of 30 days after acceptance. Both the inspection contingency and financing contingency were originally at 15 days, and the seller would pay $2,000 in repairs.

The buyer offered to purchase the home for $300,000 with other counters involved. The seller then countered the asking price at $315,000 along with the other counters present. The buyer can then counter the seller’s counteroffer, accept the counteroffer or decline the counteroffer. If the buyer accepts the original counteroffer, they’ll end the negotiations and move ahead to close on the home.

The Bottom Line

Counteroffers provide both buyers and sellers with power to negotiate and come to an agreement on the home sale price as well as other terms and conditions. A counteroffer is a standard part of any real estate transaction, so it’s best to be familiar with how to make a counteroffer if you’re buying or selling a home.

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