How To Prepare A Real Estate Counter Offer
Melissa Brock6-minute read
February 22, 2023
From the outside looking in, real estate counter offers can seem like bartering for an object at a flea market. However, counter offers can help both buyers and sellers get close to what they want from the transaction.
Home buying is often stressful enough for many people – add in putting an offer on a property you really want and then worrying if the seller will take it, and you might be feeling overwhelmed. If they come back to renegotiate, though, it's important to remember that you’re not alone when working through what’s called their counter offer. Your real estate agent or REALTOR® can act as a go-between during these negotiations.
Let’s dive into what you need to know, and look at some examples of real estate counter offers.
What Is A Counter Offer In Real Estate?
Counter offers become part of the home buying and selling process after buyers make an offer on a house and the seller wants to change their deal to fit their sale goals better.
In the home buying process, a counter offer is an offer made in response to the original bid. When a seller gets an offer, they can choose to accept, reject or counter. In return, if the seller makes a counter, a buyer can also choose to accept, reject or counter it.
Home sellers and buyers alike use this tactic to negotiate the best price and terms possible.
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How Does Making A Counter Offer On A House Work?
Several scenarios may warrant a counter offer, and the countering process looks a little different for home buyers and sellers.
A seller can counter a buyer’s initial offer to change the purchase price or increase the earnest money deposit.
For example, let’s say you’re the seller and you list your home for $220,000. However, a buyer offers you $200,000 instead. Maybe you're still interested in signing a contract with that buyer for your home. If so, you make a counter offer of $210,000. At this point, the buyer may agree to that price, or the buyer may counter in response to your counter offer. To make your offer stronger, you may want to provide comps, or comparable homes in the area, to show why that price is reasonable.
Sellers can also make counter offers for other reasons, such as changing the closing date or contingency periods. Sellers will typically communicate the terms of the counter offer through their listing agent or real estate agent, and may also put an expiration date on the counter offer to speed along the home sale process.
A buyer can also counter a seller’s counter offer, as we’ve mentioned in the previous example. There are no limits to the number of counters you can submit as a buyer.
Home buyers first create an offer that may be below the asking price when they want to negotiate the house price presented by the home seller. The home seller may counter with a higher price than the buyer’s original offer, but lower than the original asking price. If the buyer thinks the price is still high, they could counter it.
Let’s take a look at our previous example, only this time, you’re the buyer. A seller lists a home for $220,000, and you, the buyer, offer $200,000. If the seller comes back with a $210,000 counter offer, you could accept the deal or counter $205,000.
In another scenario, you might counter because a home inspection reveals issues with a property, such as a cracked foundation. You can ask the seller to take the price down to $200,000 if you find out that fixing the foundation issues will cost $20,000.
Buyers resend the counter offer terms to the home seller through their agent.
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3 Tips For Making A Counter Offer
Let’s take a look at a few negotiating strategies for those hoping to make a counter offer that the other party will accept.
The tactics in the following list could even be used to win a bidding war:
- For sellers: Pay more of the share of closing costs. Sellers can offer to pay some of the buyer’s closing costs. Closing costs usually run 3% – 6% of the mortgage loan amount, so take a look at your budget to determine if you have enough wiggle room to help with the closing costs.
- For buyers: Increase the earnest money deposit. The earnest money deposit is an important tool in a real estate transaction because it communicates to a seller that you're serious about buying. Increasing the earnest money deposit can help make your offer more attractive. Normally, people put down about 1% – 3% of the sale price. Adding more could sweeten the deal for the seller.
- For sellers: Exclude or add personal property. Personal property, such as furniture and appliances, can be included in a home sale negotiation.
What If My Counter Offer Is Rejected?
If your counter offer is rejected, don’t give up just yet – you still have two options. You can either walk away from the deal or create a different counter offer. You’ll typically have 1 – 3 days to prepare and send the new counter offer, if that’s what you’d like to do.
Keep in mind that once you make a counter offer, the original offer (or, in some cases, the original counter offer) is off the table. If your counter offer is rejected, you usually cannot go back and accept the previous offer.
It’s important to collaborate with your real estate agent to improve your offer by tailoring it to the other party’s motivations or weighing your pros and cons. It’s through this process that you’ll determine whether you should look for a new home or a new buyer.
When Should I Accept A Seller’s Counter Offer?
As the buyer, when should you decide to accept a seller’s counter offer? An offer may only go on the table for 24 hours or less in a hot real estate market. It’s important to know where the housing market stands – i.e., whether your area is in a seller’s or buyer’s market – to get a head start on the competition.
Keep in mind that, if you’re countering, you’re not yet in a contract – and the seller could get another (better) offer while you're still going back and forth. The buyer and seller can work through negotiations until reaching an agreement, but it becomes legally binding when they sign the offer.
You should review the following factors before you accept a seller’s counter offer:
- Contingencies, which refer to requirements that must be met for the sale to go through
- Sale timeline
- Whether the seller’s counter offer fits into your budget
- Whether you understand all parts of the offer
Once the counter offer has been accepted, the buyer and seller then sign a contract. The buyer must secure financing, and the seller must complete any repairs stated in the agreement.
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FAQs: Real Estate Counter Offers
Let’s answer some common questions about real estate counter offers.
Can sellers make counter offers with multiple buyers?
State laws vary on whether a seller can participate in more than one sale negotiation at a time. You should ask your real estate agent about the laws in your particular state. Sellers should not make multiple offers at once, and not doing so benefits all parties involved.
When should I walk away from a real estate negotiation?
Buyers or sellers should not feel obligated to continue negotiations if they don’t feel comfortable with the sale price or agree with the terms of the counter offer, such as waiving the home inspection contingency.
If you’re the buyer, you should recognize the following red flags as signs to walk away from a real estate negotiation:
- The appraisal comes in lower than what you’ve offered.
- The home inspection reveals some major problems with the home.
- Someone else lays claim during a title search.
- It’ll cost a lot of money to insure.
- The deed restrictions are difficult for you to navigate.
Should I counter a lowball offer?
When a seller gets a lowball offer, or an unreasonably low offer on the house, they should always counter. For the seller, the act of countering an offer tells the buyer that they’re still interested in selling to them if they improve the terms of their deal. For your reference, there are many reasons a buyer may make a lowball offer, including:
- They don’t believe the house is worth the listing price
- They’re uniformed about the market
- They’re not serious about buying the home
- They’re justifying the cost of repairs, renovations or improvements
- They’re testing the seller
What’s an example of a real estate counter offer?
Here’s an example of a typical offer/counter offer negotiation on a home listed for $250,000:
- The buyer initially offers $240,000 with closing in 30 days. The buyer also asks for the seller’s furniture and for the seller to pay closing costs.
- The seller counters with a price of $245,000, but does not agree to pay closing costs. However, the seller agrees to throw in the furniture. The seller also wants to close in 40 days.
- The buyer accepts the seller’s counter offer, agreeing to the price of $245,000 and to the 40-day period to close.
The Bottom Line: Prepare To Negotiate
While buyers and sellers alike often benefit from accepting a counter offer, sometimes a counter works to one party’s advantage more than another’s. As a buyer, understanding these concepts can help you negotiate more effectively and stay within your budget.
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