6. What is a Counter Offer?

by Local Title

When a buyer submits an offer to purchase a property, the seller has three primary options: accept the offer as is, reject it outright, or make a counter offer. A counter offer modifies some aspects of the original offer, such as the purchase price, closing date, contingencies, or other terms.

Key Elements of a Counter Offer

  • Purchase Price: Often, the primary focus of a counter offer is the purchase price. Sellers might counter with a higher price if the initial offer is below their expectations.
  • Closing Date: Sellers may propose a different closing date that better fits their schedule or aligns with the availability of their next home.
  • Contingencies: Counter offers can adjust contingencies, such as requesting a shorter inspection period, modifying financing conditions, or removing certain contingencies altogether.
  • Earnest Money Deposit (EMD): The seller might request a higher EMD to ensure the buyer’s commitment to the transaction.
  • Repairs and Credits: Sellers can counter by rejecting certain repair requests or offering a credit instead of making the repairs themselves.
  • Inclusions and Exclusions: The seller might modify what is included or excluded in the sale, such as appliances, fixtures, or other personal property.

The Counter Offer Process

  1. Review the Initial Offer: The seller and their real estate agent review the buyer’s initial offer to understand the terms and identify areas for negotiation.
  2. Draft the Counter Offer: The seller, with the help of their agent, drafts a counter offer that outlines the proposed changes. This document legally modifies the original offer and includes the seller’s desired terms.
  3. Present the Counter Offer: The seller’s agent presents the counter offer to the buyer’s agent. The buyer then reviews the counter offer and decides how to respond.
  4. Buyer’s Response: The buyer has several options:
    • Accept the Counter Offer: The buyer agrees to the new terms, and both parties proceed with the transaction.
    • Reject the Counter Offer: The buyer decides not to continue negotiations, ending the potential transaction.
    • Make Another Counter Offer: The buyer may respond with another counter offer, proposing further adjustments to the terms.
  5. Negotiation Continues: This process can repeat multiple times until both parties reach an agreement or decide to walk away.

Strategic Considerations

When making a counter offer, it’s essential to consider the broader context and strategy:

Evaluate Market Conditions

In a seller’s market, where demand is high and inventory is low, sellers may have more leverage to counter with higher prices and fewer concessions. Conversely, in a buyer’s market, sellers might need to be more flexible to attract and retain buyers.

Prioritize Your Needs

Identify your priorities and deal-breakers. Determine what aspects of the offer are most important to you, such as the sale price, closing date, or specific contingencies. This clarity helps you focus your counter offer on the most critical terms.

Be Realistic

While it’s natural to aim for the best possible terms, it’s also important to be realistic about what the market will bear. Excessively high counter offers or demanding terms can discourage potential buyers and prolong the sale process.

Communicate Clearly

Effective communication between both parties and their agents is crucial. Clearly articulate your reasons for the counter offer and be prepared to explain your position. This transparency can foster a cooperative atmosphere and facilitate smoother negotiations.

Legal and Formal Aspects

A counter offer is a legally binding document. Once the buyer accepts it, the terms become part of the purchase agreement. Both parties must sign the counter offer, and any subsequent counter offers, to formalize the changes.

In some jurisdictions, the initial offer and counter offers may be combined into a single amended contract, reflecting all agreed-upon terms. It’s essential to ensure that all changes are documented accurately to avoid misunderstandings or disputes later.

Counter offers are a vital part of the real estate negotiation process, allowing both buyers and sellers to adjust terms to their satisfaction. By understanding the elements and strategies involved in making and responding to counter offers, sellers can navigate negotiations effectively and achieve a successful transaction. It’s always advisable to work closely with a knowledgeable real estate agent who can provide guidance and support throughout the process.