The Seller made a counter offer to our offer, what happens now?

Understanding the Real Estate Process from A – Z – A Buyer’s Guide to Real Estate – Part 8

This is the eighth post of a series in an FAQ format that I hope will help would be buyers better understand the real estate process that they are about to go through. There is a follow-on series to the posts for real estate sellers.

FAQ – The Seller made a counter offer to our offer, what happens now? (Alternate FAQ – The Seller responded to our offer with a Sellers’ Response to Offer. What’s that all about?)

There are multiple things that the seller can do with an offer in hand. One obvious one is to just reject the offer, which could happen if the Buyer went in with a low-ball offer that offended the Seller. In that case you’re done. You will need to start all over and write a new offer, if you haven’t offended the Seller so much that he doesn’t want to deal with you at all any more.

Assuming that you didn’t offend the Seller with a low-ball offer there are a couple of ways that he

can respond to your offer. The most common way is for the Seller to make a counter-offer. In that case the seller will usually cross out the things in your offer that he doesn’t agree with (usually starting with the offer price) and write in what he desired instead and initial those changes. The changes may include changes to any or the terms and conditions of your offer, such as the possession that you ask for or the proposed closing date or your request for Sellers’ Concessions. Many times some of those terms or conditions may be as important to the Seller as the offer price.

So, maybe your offer was for 90% of the asking price, with a Sellers’ Concession for another 3%, and you wanted possession at closing. Maybe you specified a closing date that is 60 days out from the acceptance date and maybe you only put a small amount in as EMD and you are indicating that you will be financing 97% of the sale amount.

That’s a fairly weak offer to begin with, made worse by some of your demands. It would not be unusual for a Seller to come back and ask for an increase in your offer price and in the EMD. He might also either reject or modify downward what he is willing to contribute to your closing cost in the Sellers’ Concession. He may demand a closer-in closing date that is only 30-45 days from the acceptance date. He may also ask for a few days of post-closing possession. Those would all be reasonable requests by the Sellers.

By making a counteroffer the Seller has entered into negotiations with you and would not be able to accept other offers that he might receive, unless he retracts his counter-offer. The Sellers’ counter-offer makes your original offer dead. What has happened is that, instead of there being an offer from you to buy the sellers’ property for a specific set of terms and conditions that you had specified, there is now the Sellers’ offer to you to sell the property to you for a specific set of terms and conditions that he has specified. This new offer needs to be resolved one way or another before either you or the seller can move on. Just like in your original offer, there will be a deadline specified for a response after which the counter-offer become null and void.  Both the Buyers and Sellers should be aware of

those deadlines and both should demand that there be such deadlines so as not to create an “open ended” offer.

An alternative to a counter-offer that is used locally is called a “Sellers’ Response to Offer”. This is usually a document that has a letter-like structure, which is some form states the following:

“The Seller does not accept your offer of (date goes here) for the property at (address goes here); however, should you make the following changes to your offer and re-submit it the Seller would be predisposed to consider it more favorably. The Seller will continue to market the property and look at any and all offers.” Then the Seller would include a list of the terms and conditions that need to be changed.

Notice that the language in this response does not bind the Seller or Buyer into any negotiation process. The Seller has clearly stated that he is rejecting the original offer and offering suggestions for changes that are more acceptable to him. Even then, he is not saying that he will accept a new offer with those terms and conditions, just that the new offer would be more favorably considered. The Seller is free to receive, consider and even accept any new offers that he might get. I have had sales happen where the original Buyer made all of the suggested changes that the Seller wanted and still didn’t get the deal, because an even better offer came in while he was off making the changes.

Quite often what happens, after the initial offer is presented, is that a round or two of verbal negotiations may take place, either over the phone or via emails or test messages. Hopefully the agents involved are actually exchanging texts or emails, so that there is some audit trail of sorts of the back and forth involved. When all of the issues have been resolved the deal still needs to be put in writing and all parties sign off on it. One reason for using verbal negotiations is that the documents involved can get quite messy with all of the changes that might be made during the negotiations; plus, if the documents are faxed back and forth, they will become unreadable after about 3-4 exchanges of faxes. Scanning and emailing the documents works a little better for that.

It is difficult in the heat of negotiations, but necessary, to try to put yourself in the other party’s shoes

and see things from their perspective. Everyone involved in the deal really wants it to succeed, but each party is protecting their own interests and may not grasp or appreciate your point of view or your interests.   Eventually, if you keep the deal alive long enough you will usually arrive at a win-win point where everybody is happy; or at least to a point where everyone is equally unhappy but willing to proceed.

Congratulations you have a deal!