When it comes time to sell your home, it is essential to realize that this process is one of delicate negotiation rather than merely accepting the first purchase offer provided by a potential buyer. As the seller of a property, your primary objective should be to secure the best price possible for your property. With that in mind, understanding your options when it comes to negotiating a counteroffer is critical. The counteroffer provides you with the opportunity to not only modify the terms of the potential contract with respect to the price, but also to negotiate responsibilities and costs attached to the closing.
When selling your home, certain tactics will help ensure that your counteroffers remain connected to your price targets and desires. You can use a series of simple strategies to maintain leverage during the negotiation process and ensure that your preferences aren't being swept aside.
The Basics of Counteroffers
Simply defined, a counteroffer is a reply to various terms and sale parameters posed by the buyer of a home. When a counteroffer is made by the seller, this directly implies that he/she has rejected the terms of the initial offer and is seeking to revitalize the negotiations by introducing a new proposal for the sale.
Once a counteroffer has been made, the potential buyer of the property has only three options available to them. First, they can choose to accept the counteroffer wholly without requesting any changes to the new terms posed by the seller. In this situation, the seller's offer would act as the legally binding terms of the sale contract that both parties would eventually sign.
Real Estate Counteroffer Examples
The second option might occur if the terms of the counteroffer are so far removed from the desired sale terms of the buyer that further negotiation seems fruitless. In this scenario the buyer rejected the counteroffer. The implications of this rejection are quite important. By rejecting the counteroffer, the buyer is effectively removing themselves from future negotiations and is exiting the negotiation process entirely. The seller's counteroffer was too high compared to the price point established by the buyer.
Finally, In the event that the counteroffer differs slightly from the buyer's expectations but remains within the realm of possibility, it is also possible for the buyer to issue yet another counteroffer. Here, the buyer could specifically address terms of the seller's counteroffer that they would like to have changed. Following the re-issuance of the counteroffer, the seller is faced with the same three options originally posed to the buyer: accept the counteroffer, walk away from the deal entirely or pose a new counteroffer.
Counteroffers and Contracts
It is important to delineate between the concept of the counteroffer and the contract. The counteroffers made by buyer and seller can extend on for an infinite amount of time. There is no limit to the number of revisions and negotiations that can occur during the home sale. That being said, neither party is legally obligated to any form of transaction until the offer is formally accepted in writing. Once a counteroffer has been accepted by either party, the offer becomes the contract for the purchase of the home. The terms included in this offer thus become legally binding and obligate both parties to adhere to them as the sale eventually draws to completion.
It is also important to note that each new counteroffer voids all terms attached to previous counteroffers upon its arrival. Therefore, neither buyer nor seller should ever assume that a term of the sale that appeared in an earlier iteration of the offer remains in effect in the current version. Only the terms of sale explicitly stated in the offer are valid.
Tactics for Counteroffers
There are numerous real estate counteroffer examples today that demonstrate successful and failed negotiations by the seller of the property. One of the most common mistakes that can be seen in these counteroffers is when the seller of the property counteroffers with a price below their original intended price target for the property.
It is always in the best interest of the potential buyer to issue a counteroffer. After all, there certainly is no harm in shooting for a reduction in price, and the chances are slim that a counteroffer will cause the owner of the property to exit negotiations entirely.
Considerations for the Seller
Knowing this, the seller of the property should not automatically assume that they need to lower their price as part of their counteroffer. In fact, the best possible strategy at this point would likely be to keep your price at your original price target. Doing so will help gauge the legitimate interest of the buyer, who will be forced to either continue negotiating and split the difference with respect to the price, accept the seller's terms or walk away entirely.
Sticking With Your Selling Price
No matter what the outcome, holding fast to the original selling price remains a victory for the seller. Unless the seller has established a price point so far elevated above industry norms that they are likely to scare away all potential buyers, the chances are good that another prospective buyer will come along who may be more willing to negotiate a fair price.
Finally, the seller should consider setting a hard deadline on their counteroffer to the buyer. Giving a buyer limitless time to ponder a counteroffer also allows them time to scout out other prospective properties. Placing a concrete deadline on counteroffer negotiations will force them to make a decision and, ultimately, work in the favor of the seller.
Leveraging Your Connections With Buyers
As the seller of a property, it is in no way your best interest to purposefully limit the scope of your negotiations to a single buyer. In fact, doing so could significantly limit your leverage and transfer power to the potential buyer during the negotiation process. Perhaps the most compelling reason to stay in contact with multiple buyers is that this could spark a bidding war, which will most assuredly tilt the negotiations in favor of the seller.
When buyers begin to actively compete against one another to attract the attention of the seller, the chances are good that the seller will end up with a favorable price point at which they can comfortably sell their property. Bidding wars can also help sellers find potential buyers who are willing to cover additional fees and expenses, such as closing costs, home repairs and other items that may have initially fallen on the shoulders of the seller.
Even without the prospect of a bidding war, keeping multiple buyers in the stable will ensure that a failed negotiation with a single buyer won't derail the entire home sale. If time is of the essence during your sale, cultivating multiple buyers is an absolute must. Increasing the number of potential buyers will increase the likelihood of a quick sale.
- There are many different strategies used by sellers and buyers when negotiating a deal. You will have to decide how hard you wish to play with the buyers when forming your counteroffer. If you have plenty of interest in your house, you probably have a stronger negotiating position than if you have not had many prospective buyers. A real estate agent or broker will be able to assist you by recommending reasonable negotiations and counteroffers.
- Check the expiration date of the offer to purchase to ensure that you respond within the allotted time. Allow one or two days to elapse, if possible, after receiving an offer and before counteroffering. This time may produce another offer that you find more acceptable. It also serves to unnerve the buyers, which may make them more willing to accept your counteroffer.
- Closing costs can be a significant factor when negotiating the sale of a house. As the seller, your fees may include prorated property taxes, appraisal fees, title insurance, loan points and your broker's commission. You may also have to pay a small percentage of the mortgage fee. It's perfectly reasonable to include requests about who will pay what in the offer to purchase.