The counteroffer is a common tool used in real estate transactions.
The counteroffer, which is used in the back and forth negotiations between buyers and sellers, is a tool used to by agents in order to (hopefully) come to an agreement which will lead to a successful closing.
When does a counteroffer come into play, and what are the possible reasons behind it?
Any time a house is put up for sale, or “goes on the market”, the listing agent requests an asking price on behalf of their clients, the sellers. There are many factors that are considered when determining an asking price, such as age of the house, location, condition, how long the house has been on the market and size of the property. Real estate agents will gather all of that information and compare it to recent sales in the same area to determine a reasonable asking price.
The interested buyer, in turn, can accept the price or make a counteroffer. Perhaps the buyer’s agent also did a market analysis and believes the asking price is a bit too high. If the buyer is truly interested in the property, this could lead to submitting a counteroffer. Or perhaps after seeing the property, the buyer and his or her agent found the house was really outdated or the roof or floors needs to be redone. This scenario could also lead to a counteroffer.
What is typically asked for in a counteroffer? A counteroffer generally consists of an offer to purchase the property at a reduced price. Other counteroffers might request that the seller pay for all closing costs or inspection fees, while keeping the asking price either the same or slightly reduced. If the property has damage or is in need of repair, the counteroffer may sometimes consist of a request to repair the damages or make a concession in the asking price for the cost of repair. Another contingency that is often requested in a counteroffer is a change of closing dates. There are a couple of scenarios where this becomes an important factor. The seller might be willing to pay the asking price for the home, but needs to sell their existing home first in order to come up with the money to purchase. In this case, the buyer requests a contingency stating the purchase is based upon the selling of their home. In another scenario, the seller might accept a counteroffer for a reduced purchase price, but request a fast closing if he or she is relocating for work, moving out of state, or is trying to close on another property themselves.
The appraisal itself is often a reason for a counteroffer. Upon seeing the home, the buyer might believe he or she is getting a fair deal. However, the appraisal might point out things that were not otherwise known. It could be problems with the foundation, damage from termites, or water damage. This is a common and completely reasonable reason for a buyer to work with their real estate agent to come up with a counteroffer.
Once a counteroffer is proposed, the seller has multiple options. He or she can accept the offer, reject the offer or submit a counteroffer.
If the counteroffer is reasonable and it appears to be a request the seller and agent can work with, the seller might then come back with their own counteroffer. This process of going back and forth could go on for weeks, and in some rare cases, could last months, before an offer is agreed to by both parties.
Whether you are the potential buyer or the seller of a property, learning the ins and outs of a counteroffer and understanding this negotiation tool is extremely important. Always make sure you are working with an experienced agent to help navigate this process to make sure you are getting the best possible outcome for your personal situation.