What to Expect in a Counter Offer

Let’s face it – HGTV makes buying a house look really easy. We’ve all seen those shows where the buyers have a little chat with their agent and she runs off to make a phone call with a verbal offer for the seller. When she comes back, she says, “you just bought a house!” Piece of cake, right? Well in reality, buying a house is usually a long process that has many stages. Writing your initial offer – as nerve-wracking as it may be – is usually just the first step in the dialogue between you and the seller. In this market, most buyers should then be prepared to go through a second (and possibly even third) counter offer round. Here are a few tips about what to expect when you receive your counter offer:

Multiple vs. Single Counters

A seller can choose to counter your offer at anytime – even if you are the only offer and you’ve submitted at the asking price, the seller can always counter you. If you are the only buyer getting a counter offer, then you can lock down the sale right away by simply accepting their counter offer. Once you sign, you are under contract. However, if the seller has chosen to counter multiple offers, then the process is slightly different – once you sign and accept, the seller has to also sign in order for the contract to be valid. This allows the seller to wait for all the counters to come in, review those offers, and then make a final selection.

Set Price vs. “Best and Final”

Unless you get really lucky, your counter will probably include a request for more money. This can be done in one of two ways – the seller can give you a specific number they’d like you to agree to, or they can ask you to submit your “best and final” or “highest and best” offer. Each option has its drawbacks. If a number is given, you can typically assume that all of the countered buyers (assuming there are multiple offers) were given the same price. In essence, this “resets” the asking price. Buyers can now choose to accept that price, or they can decide to offer an even higher price. This can sometimes serve to drive the price up higher than it might go if a specific number was not given out. In the case of a ‘best and final” request, you may not have any idea where the other offers are or what the seller is hoping to receive. In that case, you have to simply offer the highest amount you are comfortable with and hope it’s the best offer.

Changing Terms

Along with asking you to up your price, sellers can also ask you to change the terms of your offer in their counteroffer. This may mean changing the length of the escrow period, shortening your contingency periods, or denying your request that the seller leave the appliances or pay for the termite repairs. Recently, a common request by sellers is that the buyers remove their appraisal contingency from the contract entirely.

What are your Options?

There are a few different ways that you can respond to a counter. If the seller gives a specific number and you agree to all terms, you can simply sign to accept the counter. If you want to make changes to the counter, you have many options. You can decide to go even higher than the countered price, or you can submit a number lower than the countered price – either sticking with your original number or going up a bit from there but not as high as the countered price. You can agree to all terms, or you can agree to some and change some. You can also throw in new terms that you think might sweeten the deal for the seller – like agreeing to pay for the termite repairs or removing your request for a home warranty.

What happens next?

The vast majority of the time, sellers will make a final decision and pick a buyer after one round of counters. However, it is possible that the seller may decide to send out a second round of counters, making you go through the process all over again. That tends to anger buyers, so we usually only see that strategy in extremely competitive situations. Sometimes after the first counter the listing agent will call your agent to discuss a small change in price or terms without formally sending out a second counter. If you come to an agreement this way, the final agreement will then be signed between you and the seller without counters going out to all the other remaining buyers.

The Wild Card

The bottom line is that anything can happen during the counter offer round. I recently encountered a situation in which my buyers were countered with a “best and final” request and they submitted a strong response. While we were waiting to hear the sellers’ final decision, the listing agent raised the price of the house in the MLS by $60K. Was this a not so subtle way of expressing the sellers’ expectations? Who knows – I find that with counters, just when you think you’ve seen it all, you get thrown a curveball. The only thing you can do to be successful during a counter round is listen to your agent’s advice and be as aggressive as you are able. Hopefully you will win that accepted offer and then you can move on to worrying about the next step: surviving escrow.