12 Tips for Making Successful Counteroffers

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Some people say that writing is, in reality, the art of rewriting. In real estate it’s similar. Getting the deal you want isn’t just in the offer you make, it’s also in the counteroffer. Counteroffers occur when the seller turns down your original offer, but then sends you back a sales agreement that offers different price, terms, or virtually anything else that departs from your original offer. It is at this point that negotiations begin in earnest. How well you respond to the seller’s counteroffer with your own counter (or acceptance) determines the quality of the deal you’ll get.

Some very savvy buyers will purposely make lowball offers in the hope that the sellers will counter, perhaps at a price lower than the buyer is willing to pay! If not, these savvy buyers hope to engage the sellers in sometimes protracted negotiations in the hope of eventually getting a much better price or much better terms.

How Do I Make a

Counteroffer?

 You make an offer that the agent and/or attorney writes up.  The agent presents the offer as soon as possible to the sellers.  The sellers either accept the offer exactly as presented or turn it down.  If the sellers turn down the offer, they can make a counteroffer to you. (They can’t both accept and counter.)  You may now accept their counteroffer exactly as written, or turn it down. If you turn it down, you may counter back. (You can’t both accept and counter.)  This countering can go on almost indefinitely. Sometimes it gets down to arguing over a washing machine or repainting one wall of a living room.  The deal is made only when both you and the seller accept exactly the same counteroffer.

Whenever you or the seller counters with any kind of change at all, it is a new offer. Either party now has the option of walking away from the deal.

Tip 1 The Terrible Offer

Some buyers will purposely make very unfavorable offers to sellers in the hopes they would counter with a compromise offer that was still far below what they were asking. This is a strategy, also called “lowballing” the seller, which sometimes works. However, it is also fraught with peril. Remember, the seller may be insulted by the low offer and simply turn it down out of hand and not counter at all, which could end negotiations. If you accept this risk, however, and the seller does counter, you could be on the way to a great deal.

Tip 2 The Compromise Offer

If you don’t want to risk alienating the sellers right off the bat, then there’s the compromise offer. It’s higher than the lowball, but still far lower than what the seller is asking. This is an offer that you’re pretty sure will drive the sellers to the negotiating table. It sets the stage for a bargaining process that will get you the property at a price and terms you can afford and are willing to pay. How do you know what to put into the “compromise offer?” What price, terms, and so forth should it be? Every situation is different. However, the general guidelines are that you try to make the lowest offer to which the seller will make a serious counter. You’ll have to judge the seller’s motivation and the market conditions.

Tip 3 The Wonderful Offer

You would only make this offer if you were desperately in love with the home and/or the market was strong. You would offer very close to full price. (Sometimes in a very hot market you might offer full price or higher!) You want the sellers to know that you’re intent on buying their home. But you’re hoping that they will cut you a little slack by either accepting your offer as is, or countering by taking a little off the price. In a normal market, the sellers might indeed accept. Or they might counter, splitting the difference. In a very hot market, they might simply counter by re-offering their original price. Or even offering a higher price than they were asking and than you offered!

Tip 4 Don’t Paint Yourself

Into a Corner

If you only make terrible offers that favor you, you’ll often lose. If you’re determined to have the house, you’re better off making a counter that contains enough bones for the sellers so that if they don’t accept, at least they’ll counter back.

Tip 5 Keep the Ball in Play

The goal in bargaining is to keep the ball in play. You always want there to be a counteroffer somewhere en route. The moment either you or the sellers stop countering, the deal is dead.

Tip 6 Pay Attention to

Timing

When you make an offer to a seller, it is open ended. That means that you’ve written down the price, the terms, and any other conditions that you want, and that you agree to be bound by them. If the seller accepts and communicates that acceptance to you, you’re on the hook. However, things change. The house you’re in love with today may not be so appealing tomorrow. Yet another home may come along that really turns you on next week. Your financial condition could change. Therefore, you don’t want to make this open-ended offer last forever. Further, if you give the seller lots of time to consider your offer, someone else may slip in a better offer. Therefore, you want to set a strict time limit on your offer and your counters. Make your offer for as short a time as practical. 24 hours is not unreasonable. Midnight of the day the offer is presented may not be unreasonable, if the sellers can easily be reached. (Be sure to take into consideration how long it will take to contact the sellers. But remember, today, almost everyone is reachable by phone, FAX, or email.)

Tip 7 Don’t Let Agents Bully

You into Giving More Time

Sometimes agents will encourage you put in a long period of time four to five days or even a week for acceptance to take place. They may say that it will take that long to convince the sellers to sign. This approach makes sense only if the sellers are out of the country, maybe off the planet! Even then it may only be marginally good advice. Remember, the more time the sellers have to think about it, the more time for them to talk themselves out of accepting it. And the more time there is for someone to come in with a better offer. Giving the sellers a lot of time to accept is simply cutting your own throat.

Tip 8 Be Prepared to

Withdraw Your Offer

It’s important to understand that although your offer is open ended (you’re committed; the sellers aren’t until they sign), and although it has a defined time limit for acceptance, you do not have to keep it open. Anytime before the sellers sign and that acceptance is conveyed to you, you can withdraw the offer. You make an offer at 5:00 o’clock that the agent will present to the sellers at 8:00 o’clock. At 8:30, you call the sellers’ house and ask the agent if they’ve accepted. He says he’s just presented it and they’re thinking about it. They’ll probably sign in a few minutes. You instruct him to withdraw the offer immediately. The offer is no longer good. Why would you want to withdraw an offer? There are lots of reasons. Soon after submitting an offer, you find a better house at a better price. You want out of the offer immediately. Or, perish the thought, you or a family member has a car accident or you discover that you have a debilitating disease and you don’t want to go through with the deal. Or you’re simply being fickle. It doesn’t matter. You don’t have to have a reason. You can withdraw the offer anytime before acceptance is communicated to you.

Tip 9 Don’t be Confused by Talk That the Sellers Have Accepted Your Offer with a Few Minor Changes

Many first-time buyers are unaware of the important subtleties of unaccepted offers. I have seen agents get sellers to make a counteroffer, then call the buyer and say, “Congratulations your offer was accepted! Only the seller made a few changes that I’ll need to drop by and have you initial. I’ll explain it to you when I get there.” That’s wrong. If the seller changes anything, it’s a new offer totally and completely. A counteroffer is just that. It’s a new offer that the seller is making.

You are under no obligation to accept a counteroffer, no matter how close to your original offer it may be.

Tip 10 Sellers Are Risking, Too

Be aware that sellers are at great risk when they make counteroffers. This is so because they are, in effect, rejecting your offer and substituting another for it. When this happens, the tables are turned. The sellers may give you a time limit to accept their counteroffer and you can do with it what you will. (Just remember, if you counter the counter, once again the ball’s in the other court.)

Tip 11 Keep to the Same

Document When Possible

It is good strategy to make the counteroffer (either your own or the sellers’) on the same document as the original offer. The reason is psychological. When the sellers counter on the same document, even though you may know that their counter rejects your original offer, using the same document makes it somehow seem like you’re closer than before. When you counter the sellers’ counteroffer, putting it on the same document does the same thing for the seller. Some agents use sales agreements that have a separate section on the last page that reads, “Seller’s Counteroffer.” The idea here is that this is the designated place for the sellers to write in their counter. I think this is a bad idea. It encourages sellers to think that a counteroffer is warranted. A sales agreement with no specific place for the counter, on the other hand, implies hat it should be accepted.

Tip 12 Know When to Stop Countering

Sometimes you and the sellers are so far off on price or terms that it becomes obvious that there is no real room for compromise. For example, the best offer you can make is $212,000 and the best

counter the seller can make is $250,000. Sometimes you have to accept the fact that not all deals can be made. Refusing to counter can also be a bargaining tool. After several counteroffers you’re still apart on price or terms. Instead of accepting the sellers’ most recent counter, you do a “walkaway” and send it back. You include a signed statement to the effect that your last counteroffer (the one before the sellers made their most recent counter) is your final and best offer. You’ll give the sellers until midnight to accept it or you’re no longer interested in the property. Further, you’re not interested in any more counteroffers from the sellers. The idea here is to decide the deal on a single throw of the dice. It’s all or nothing. You’re tired of bargaining. Either the sellers accept what you’ve offered or you’ll go elsewhere. I’ve personally used this technique many times and it works for me more often than it fails! You just have to be prepared to give up the house in case the sellers remain adamant.