When a buyer makes an initial offer, it can go one of three ways: The seller accepts all the terms and conditions, the seller rejects the offer, or the seller negotiates with a counteroffer.
What is a counteroffer?
Counteroffers occur when a seller isn’t satisfied or doesn’t agree with the buyer’s initial offer but wants to reach a compromise. It’s a back and forth process until the buyer and seller reach a compromise. Once the buyer accepts the counteroffer, the original offer is considered void.
The counteroffer process is an art as one needs creativity on top of sharp negotiating skills and a good plan to pull it off successfully. Here are several important factors to keep in mind.
The lowdown on counteroffers
As a seller, it’s essential to understand counteroffers and how they work.- You aren’t required to make a counteroffer When a buyer makes an offer on your home, you don’t need to start crafting your counteroffer right away. Upon digesting the content of the buyer’s offer, you can choose to accept or reject it. Sellers don’t need to respond to or formally reject the offer, as well.
- Your negotiating power depends on several factors Before submitting a counteroffer, it’s important to understand the local market conditions first. Being in a buyer’s market, for instance, gives you less negotiating power since the buyers have the upper hand. A seller’s market gives you more room to negotiate, from asking above the list price to coming up with certain contingencies. Your current situation also affects how you craft your counteroffer. Are you in a hurry to move out of the house? Are you after a contract with fewer buyer contingencies? Understanding the local market conditions and your current situation is useful in determining the right negotiation tactics. This also helps your real estate agent in figuring out your next steps.
- Sellers should reexamine their goals The biggest question sellers always ask is, “How do I sell my house fast for market value?” But before negotiating with the buyer, it’s always a good idea to take a look at your real estate goals and what you should be prioritizing. While money is an important factor, there are other elements that you need to consider, as well. Are you looking to sell your house quickly? Are you asking for more money? What are your original real estate goals?. Knowing what you want to come out of the home sale makes the negotiation process a smoother one. It also helps you to prepare ahead of time since you already know the terms you are willing to compromise on and the ones that are deal breakers.
- Planning strategies with your real estate agent is key While negotiating with the buyer and their agent is left to your real estate agent, it helps to come up with some strategies for sellers to accept your counteroffer and make the final decision to buy your home. Here are some suggested negotiating moves:
- Proposing with a new list price. It’s expected for buyers to make an initial offer that’s lower than what you’re asking for. For your part, you can counter-offer with a price that’s higher than what was initially offered without reaching your original list price. While you may not get top dollar for this strategy, it will definitely get your home sold.
- Having an expiration date. If you’re looking to close the deal quickly, consider placing an expiration date. This will encourage the buyer to come to a decision quickly and get your house off the market.
- Paying closing costs. Another negotiation strategy is offering to pay for the closing costs. Since closing costs can reach around 3% to 6% of the home’s purchase price, buyers often look for ways to alleviate the cost of buying a home. If a buyer asks you to pay for the closing costs, you can agree to shoulder the costs for an increase in the purchase price.
- Bidding wars can backfire If you’re looking to get the highest possible price for your home, bidding wars are usually the way to go. However, they can backfire and buyers can end up walking away, leaving you with none. And while wanting to get the best and highest offer is understandable, it is considered unethical to choose another offer and negotiate with another one simultaneously.