Counteroffer definition: What does it mean when I get a counteroffer?
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A counteroffer indicates that the seller accepts some of your offer, but wants a few changes, for instance:
- The sales price
- How much time you have to arrange your financing and close
- Inspection requirements
You can walk away, accept the new terms, or counter their counter-offer until you reach (or don’t reach) a mutual agreement.
Counteroffer definition: “a conditional acceptance”
Because most Americans are raised to respect price tags (the listed price IS the price), few of us are “natural born negotiators.” So when we go to buy a home, we’re out of our depth. For example, what do you do when, instead of accepting your home offer, the seller makes a counteroffer?
Once you submit a home offer, the seller can accept it, reject it (sometimes by simply ignoring it) or send a counteroffer.
Legally, a counteroffer is a “conditional acceptance.” The seller is saying, “I accept your offer on the condition that you agree to ___ and ___.”
If you receive a counteroffer, and you really want the house, act fast. Counteroffers come with expiration dates (often as little as 24 hours).
You can accept the counteroffer “as is,” walk away, or submit a buyer’s counteroffer to the seller’s counteroffer.
If you choose to negotiate, an agent can help. Your agent can learn what the seller really wants and help craft a buyer’s counteroffer.
Just as important, your agent can work to bring the bargaining to a swift end. Otherwise, the process could become a never-ending game of ping pong. Offers, counteroffers and counter-counteroffers could fly back and forth for weeks – or even months.
There’s no limit to the number of counteroffers that a seller can make.
Quid pro quo
To up the odds of a successful transaction, set reasonable expectations, make reasonable offers, and put yourself in the seller’s shoes.
Practice the art of “quid pro quo,” which means “something for something.”
The best way to seal a deal is to give the buyer something he or she wants in exchange for something you want. In most cases, what the seller wants is:
A higher sale price. This is the most common request in seller counteroffers. In response to your offered price, the seller will counter with a price somewhere between your quote and the original asking price or will insist on the full asking price.
More (or less) time until the closing. If you propose a closing date of 30 days from acceptance, but the sellers need more time to move, they might counter with a closing date of 60 days from acceptance.
A bigger earnest money deposit. If a seller is concerned that you may back out of the deal, he or she might want you to increase the “good faith” earnest money deposit.
Higher contributions to closing costs. It never hurts to ask sellers to contribute to your closing costs. But in sellers’ markets, many homeowners will shoot down this request in their counteroffer.
Fewer contingencies. Although most sellers will accept a few standard contingencies – e.g., a “passing grade” from a home inspector – some will refuse anything more. For example, some buyers ask sellers to include major appliances (refrigerators, washer-dryer sets) as part of the deal.
How aggressively you negotiate should depend on market conditions in your area.
In a buyers’ market, where a seller’s home may have received few (or no) offers, you have the upper hand.
In that case, you may be able to get the house for less than the asking price.
If the seller refuses to budge on price, hoping a better offer will come along, you might include an escalation clause in your buyer counteroffer.
This states that you’ll pay a certain price for the home, but if another buyer offers more money, you’ll match that offer. (If that happens, have your agent verify that the other offer is genuine by getting proof of funds or pre-approval of a mortgage.)
In a sellers’ market, sellers may have multiple offers for their homes, so your options are more limited.
This doesn’t mean, however, you should automatically cave into all the seller’s demands. Instead, you can get creative with quid pro quo.
For example, if you think (or know) that your offered price is competitive, try sweetening the deal with other incentives.
If you originally asked the seller to contribute $5,000 to the closing costs, you could drop that request. Then, have the seller increase the sale price by $5,000 so you can finance those closing costs with the mortgage.
You could also change the closing date to suit the seller’s needs, eliminate all but the most vital contingencies, or increase the earnest money.
Or, you could agree to a higher price for the home, but ask the seller to include some personal property – like that washer-dryer set. This will let you finance, with the mortgage, some major appliances that you might need anyway.
Know When to Fold
If you and the seller are separated by just a few thousand dollars, it may be worthwhile to meet the higher price – as long as your pre-approved mortgage covers the difference. If not, be prepared to walk away.
It’s also wise to fold if you learn that the seller’s counteroffer is merely a “stalling tactic.” Some sellers send one counteroffer after another to keep you busy while they wait for a better offer to arrive.
In some states, sellers are even allowed to make multiple counteroffers to different buyers. And each buyer might get a different counteroffer. So even if you agree to all the seller’s requests, he can reject your acceptance if another buyer agrees to a better deal.
Finally, never sign a counteroffer unless you are 100% comfortable with the sale price and other terms.
Once you sign the purchase agreement, and the seller accepts, it’s a legally binding document. If you try to back out of the deal now, you may lose your earnest money.Verify your new rate (Aug 26th, 2019)