What Is A Counteroffer in A Home Purchase Negotiation?

Apr 14, 2022

4

min read

H

ome is a big financial commitment for both buyer and seller. Thus, there is a tug of war while negotiating for the home purchase, and the home is finally sold at a mutually agreed price after several negotiations.

Thus, purchasing and selling a home is a lengthy process that must be done carefully to get the best deal. For a mutual agreement, both parties make several offers and counteroffers.

The secret to securing a good deal is to master the art of the real estate counter offer.

What Is A Counteroffer?

A counteroffer is a new offer placed in response to a request. It rejects the terms and conditions in an initial offer and instead offers new terms and conditions.

For instance, if the seller is selling a good at $50 and the buyer offers the seller for $30. The seller rejects the offer and offers to sell at $40. This is called a counteroffer.

Counteroffers are very common during the home purchase negotiation process. The seller gives a return offer, and it is crucial to negotiate the counteroffer and get the best deal.

There are no limits for the counteroffer, and it goes on until one party accepts the offer.

How To Respond To Counteroffers?

Counteroffer means a change in one or more terms and conditions in your original offer. After you get the counteroffer from the seller, you can either accept or present a new counteroffer of your own.

If you accept the counteroffer, it will be the final offer and form a legal contract between you and the seller. After you take the counteroffer, you cannot back out of the proposal as you are legally bound in the contract.

Similarly, if you reject the counteroffer, there will be no contract. You can search for other properties which fit your needs and budget.

However, if you present a new counteroffer, a new offer is formed, which will make the original offer void. Now, it's upon the seller to accept, reject or present a new counteroffer.

What Can Be Negotiated In A Counteroffer?

Purchase Price.

After getting your loan approved, your lender's pre-approval letter will tell you the most you can pay for a home. You can negotiate with the seller about the purchase price so that it coincides with your pre-approved loan.

Closing Cost.

Closing costs, including insurance, title fees, taxes, and appraisals, are frequently the most heavily bargained item between buyers and sellers.

Closing costs can amount to up to 5% of the total loan amount, and sometimes, the buyer might not afford to pay for the house since the closing costs are high.

The lower the closing cost, the more reasonable the total purchase price.

Closing Date

The closing date is when you receive the keys to your new home. If the sellers require additional time to pack and move out, they may request it.

Similarly, if you need to move into the house quickly, you may request the seller to move out quickly.

Contingencies

The contingencies, or purchase conditions, that you included in your offer may be rejected or modified by the seller. Contingencies include home inspections, appraisals, and home sales.

Earnest Money Deposit

Earnest money, also known as good faith money, is the amount you put down with your offer to show the seller that you're a serious buyer.

The earnest money deposit, typically 1% to 2% of the purchase price, goes toward your down payment or closing costs.

Personal Belongings

You can request that the seller leave appliances, furniture, or windows.

For instance, the seller may have matching sofas that go well with the room. You can request the seller to leave the couch and include the price in the house price.

Tips On How To Negotiate A Counteroffer

Work With Real Estate Agent

Working with the real estate agent for the price negotiation process is always preferable since they are experts and experienced.

They have the experience and have handled the situation before. Thus, they know any loopholes in the process and use them to get you the best deal.

Furthermore, the real estate agent has the tactics and tips through which you can get the best deal.

Compare The House Price With Similar Property.

Comparing the house price with a similar property sold within the same price is the best tactic in counteroffers negotiation.

This can help the buyers justify their asking price and give a clear picture of their actual worth. This allows you to get closer to the negotiation price.

Deal With The Brain, Not The Heart

While it is good to have a personal relationship with the seller, financial transactions should never involve emotions.

Buyers emotional over the backstory of the seller on why they're selling the house will end up buying overpriced. It is advisable to think wisely about finances without involving emotions.

For instance, the seller might put out the home for $500K, and you asked for the $450K. The seller might tell you he cannot negotiate and needs to sell the house as soon as possible since he divorced his wife and needs to move out and take care of his children.

You might get swept away by the story but make sure the property is worth $500K before finalizing the deal.

Nowadays, people make up stories and take advantage of emotions. Don't fall into that emotional trap.

Know Your Limits

Always negotiate up to your budget. Sometimes, the seller might not be open to negotiating, and the property price is beyond your budget.

You should not purchase a property that is beyond your budget. If the negotiation cannot be settled, you should walk away and look for the property within the budget range.

Conclusion

Thus, a counteroffer is a price negotiation process in the home purchase. It may help both buyers and sellers, although, in some instances, it benefits one side more than the other.

Counteroffers will help you bargain more successfully, remain within your budget, and make more effective agreements.