Helpful Explainer Videos & Articles
On Stuff That Matters

Video — The Real Estate Tricky Stuff — Counter-Offers

63.5 seconds
The video puts this in more visual terms, but basically, a seller can respond to a buyers offer with changes - a counter - that improves the terms. You need to put yourself in their shoes and construct a modified offer that you think they might take that meets more of your needs. Then it is their turn - accept, reject, or construct yet another counter. It is an efficient market process, but beware: clauses and costs matter. Your broker should be closely involved in constructing a counter. Successful bargaining is best done with a win/win approach where each side is meeting their biggest needs and compromising others to reach an agreement. Remember that outside conditions like interest rates, and supply and demand, will keep evolving so you will need to be patient but decisive to craft an counter-offer that works for both sides.

Everything You Should Know About Real Estate Counter Offers

TL/DR: In real estate, what does "counter offer" mean?

In real estate, a counter offer is a new offer that comes after the first offer. A counteroffer means that the first offer was turned down and a new one was made instead. The original offerer has three choices: to accept the counteroffer, to reject it, or to make another offer.

In Detail

In a perfect world, buying a house would be as easy as making a good offer, signing the contract, and closing on with your life. But this isn't a perfect world, and when you get an offer from a home buyer or seller, you usually have three choices: accept, reject, or make a counter offer.

Since real estate is all about making deals, a counter offer is usually the best way to go. But making a counter offer is harder than it sounds, and it could take months before the deal is finalized. To get a good deal on real estate, you need to know how to make a counter offer.

In real estate, what is a counter offer?

This is the offer that the seller makes in response to the first offer that the buyer made. It means that the buyer's first offer was turned down, but it leaves the door open for further talks.

For example, if a three-bedroom home is listed for $250,000 and the buyer offers $230,000, the seller's counter offer could be anywhere between the buyer's offer and/or the listed price.

It usually turns the situation around, since the person receiving the offer can now accept, reject, or make a new offer. This could go on for a long time.

What can you do with a counter offer?

Most counteroffers try to change the listed price to one that is better for both parties. However, sometimes they may also change:

Earnest Money

Earnest money shows that the buyer is serious and interested in a property. The sale is less likely to fall through if the earnest deposit is bigger.

So, if the buyer makes a counteroffer, the seller may accept it, but then make a counteroffer of a bigger earnest money deposit. In our example, the seller could accept the $230,000 offer but ask for a larger earnest money deposit.

This usually happens when the house has been for sale for a long time and the seller doesn't want another offer to fall through.

Closing Expenses

A buyer may agree to a seller's offer, but then ask the seller to pay for some of the closing costs.

In the earlier example, if the seller counters the buyer's offer by changing the sale price to $240,000, the buyer could accept it or counter it again by asking the seller to pay origination and record filing fees. Most of the time, this plan works best in a buyer's market.

Closing Dates

Even if both parties agree on the price, the seller may need more time to get out of the house. In this case, they might try to change the closing date by asking for a longer escrow time. It is up to the buyer to decide whether to take the offer or not.

How many times can you make a counter offer?

As was already said, a counter offer usually makes it possible to negotiate. From this point of view, the buyer or seller can make as many counteroffers as they want. They can keep going back and forth until they both agree on something. Or, if either the buyer or the seller doesn't like the terms proposed, they could end with the first offer.

Can a seller accept another offer while they are negotiating a counter offer?

Contracts are the way things work in the world of real estate. A real estate agent can take another offer while the buyer considers the counter offer. But it all comes down to how the counter offer contract is written.

For example, if the seller sent the buyer an irrevocable counteroffer and gave them three days to decide whether to accept it or not, the buyer cannot accept another offer until the three days are up.

If the buyer signs and accepts the offer before this time is up, the seller can't back out because they could be under contract with two different buyers to sell the property. Also, if they accept another offer after signing and accepting the counter offer, the first buyer can:

  • Put a mortgage on the house.
  • Sue the seller.
  • Try to force the seller to finish the sale.

Note that the Realtor could sue the seller if they try to change from one offer to another, since they will lose out on a possible commission from the sale.

There are, however, a few ways for a seller to get out of a legally binding counter offer contract and take a better offer. These things are:

  • Buyer-requested contingencies: If the buyer plans to sell their home before buying the new one, the seller may be able to back out of the deal if they get a better offer.
  • Missed deadlines: Real estate home buying contracts have a long list of deadlines for the buyer. If a buyer misses one of these deadlines, the seller can use this as an excuse to back out and take a better offer from another buyer.

When a buyer turns down a counter offer, what happens?

A counter offer makes the buyer's first offer illegal. It usually frees them from any legal obligation they had to the original contract, and if they turn down your offer, you can't do anything about it.

For example, if the buyer in our earlier example did not accept the seller's counter offer of $240,000, the buyer is not required to go through with the purchase.

But depending on how badly they want your house, the buyer might still be willing to talk even after they turn down the offer. But how you talk to them will determine if they're willing to talk about other options.

So, if you want to go after them, you should have an experienced Realtor with you to help you handle the situation in a professional way.

How to negotiate and come up with terms that are good for both buyers and sellers in a counter offer

Counteroffers are meant to help both the buyer and the seller get what they want. Still, one side might give up too much. Here are tips to ensure you get favorable terms:

Use a Real Estate Agent

Realtors are much better at negotiating than most people. They have dealt with similar situations before and will know how to use loopholes to get you the best deal possible.

As a buyer, if you're willing to pay the asking price, your Realtor will suggest ways to get a lower sale price, like asking the seller to pay the closing costs.

If you're the seller, the Realtor will suggest ways to negotiate with the buyer to get them to pay more, like letting them know you have other offers.

Include Comps

Comparables, or "comps," are often used to figure out how much a property is worth by comparing it to similar homes that have recently sold in the same area.

Comparables can help sellers justify their asking price, and buyers can use them to figure out how much of a counter offer is too much.

Don't let your feelings affect the deal

As a seller, it's easy to get caught up in the feelings you have for your home and end up overpricing it. That means it will stay on the market because the price is just too high.

In the same way, if you find a home that fits your idea of a dream home, you might be willing to pay any price listed just to get it. To get the most out of a counter offer, you need to put aside your feelings about the house and look at things from a business perspective.

Know where you stand.

Figure out how much you want from the closing of your house before you put it on the market. If you're a buyer, decide how much you're willing to spend at most.

Counteroffers are a way to find a middle ground. Both the buyer and the seller have to give up something for the deal to work out well for both. But this will go smoothly only if you have experienced Realtors on your side. Pick your UpNest Network Realtor today to get the best deals.

Should I accept a counter offer?

It all depends. In the workplace, a counteroffer may give the impression that working conditions and pay will get better, but statistics show that this is usually not the case. About half of the people who accept counteroffers leave their jobs within a year for a new one. In real estate, your best bet may be to make a counter offer, but it could also be a low-quality buyer trying to get a good deal.

Cathy Hills
Content Associate
January 27, 2023
– More Videos –

Related posts.