Unless you’re fresh out of a Negotiating 101 final and ready to huck your textbook straight into the trash, navigating real estate counter offers might not be at the top of your mind.
That’s OK. For most folks, the wild and sometimes-bumpy ride of buying or selling a house isn’t something they’re necessarily prepared for.
homebuying process, unexpected twists and turns can arise. After sifting through hundreds of listings, attending several showings, and putting an offer in on a dream home (or two, or three), the deal can be far from done.
There are many reasons why it takes time to buy a house, and counter offers can certainly be one of them. A real estate counter offer can come into play in these scenarios:
A Change in Sales Price
One of the most commonly contested items in the closing of a house is the sales price. If buyers come in lower than the asking price with their offer, sellers might counter with the original asking price (if they’re unwilling to negotiate) or somewhere between the asking price and the offer.
Requesting a Later Closing Date
Sometimes sellers simply need more time to vacate the premises. Whether they have unfinished business or unexpected plans, they may present a counter offer that extends the escrow period to allow them more time to move out.
Increasing the Earnest Money Deposit
In some cases, the seller could up the ante by increasing the earnest, or “good faith,” money deposit the buyer submits with the offer. Earnest money deposits are typically between 1% and 3% of the purchase price, but in a hot market, there’s a chance the seller could ask for more to ensure the buyer is serious about purchasing the property.
The Removal of Certain Contingencies
Contingency clauses are actions or conditions that must be met before a real estate contract becomes binding. Common contingencies, which most sellers will see as standard in a real estate offer, are:
• An appraisal contingency to protect buyers if the property is valued lower than the amount they offer.
• A financing contingency that allows buyers adequate time to obtain a mortgage or other financing to purchase the property.
• An inspection contingency that ensures buyers have the right to a thorough inspection of the property within a specified period of time.
Some contingencies, however, are considered less than standard. For example, a home sale contingency grants buyers a set amount of time to sell their existing home so they can finance the new property. Some sellers may find this contingency burdensome, particularly in a hot market, so they could make a counter offer that removes the home sale contingency. They can also counter with a “kick-out clause” that gives a real estate agent the right to keep showing the house while buyers attempt to sell their existing home.
If a home inspection reveals necessary repairs or renovations to the property, the buyer could submit a counter offer to negotiate a lower price or ask the seller to complete the repairs before closing.
Deciding Who Covers Closing Costs
In a buyer’s market, it might be possible to negotiate some or all of the closing costs to be paid by the seller. These costs include appraisal fees, settlement fees, title policies, recording fees, land surveys, and transfer tax. Many home buyers are surprised by how expensive closing costs are, but in particularly hot markets with multiple offers, sellers can counter with a simple “no” to indicate they won’t be covering those costs for the buyer.
What’s the Typical Counter Offer Process?
While real estate counter offers vary depending on the market, the seller’s unique circumstances, and other standalone factors, there are some fairly standard parameters to the counter offer process:
What’s a ‘Normal’ Number of Counter Offers?
There’s no legal limit to the number of counter offers that can occur in a real estate transaction. Initial offers, counter offers, and subsequent counter offers could ping pong back and forth for weeks or more.
Knowing the local real estate market can be key here. In a buyer’s market with plenty of houses for sale, sellers might want to be cautious about submitting an unnecessary number of counter offers.
Similarly, in a seller’s market where inventory is low and buyer competition is high, buyers might want to limit the number of counter offers they push back at the seller.
Can a Seller Make Simultaneous Counter Offers?
Depending on the state where the real estate transaction takes place, a seller may or may not be able to make counter offers to more than one buyer. That said, most real estate agents advise against multiple simultaneous counteroffers, as it could end up in two legally binding contracts for the seller.
How Long Does the Process Take?
Number of counter offers aside, home buyers can expect a closing to take 45 days on average. But how long it takes still varies from buyer to buyer, with factors like whether they’re paying cash, how long it takes them to find an inspector, and if the house appraises at a lower value, affecting the overall timeline.
How to Counter Offer in Real Estate
To some degree there’s such a thing as real estate counter offer etiquette. Here are a few things to consider when engaging in the counter offer process:
Having a Comprehensive Picture of Costs
For buyers, having an accurate handle on what it will cost to buy the house is essential for negotiating counter offers discerningly.
mortgage calculator helps buyers break down the cost of purchasing a home.
Going In With a Strong Offer
A “strong” offer is backed by data that defines what’s happening in the market, and research (with the help of an agent) around what’s considered “fair market value.”
Coming in at 15% or more under the fair market value is generally considered a “lowball” offer and can start buyers off on the wrong foot. In some cases, sellers might skip right over anything that isn’t considered a strong offer.
Knowing What Can Be Negotiated
One of the first steps in making a real estate counter offer is knowing what can be negotiated:
• Possession date. Giving the sellers more time to move out could mean an exchange for a condition the buyer desires. Buyers hoping to move in sooner might make a counter offer requesting an earlier possession date.
• Personal property. Some of the seller’s personal property like furniture, window treatments, artwork, or gardening tools could be negotiated into the contract in a counter offer.
• Home warranty. Older houses can come with their own unique sets of systems and appliances, so buyers might make a counter offer asking the sellers to cover the cost of a one- to two-year home warranty ($350 to $600 annually, on average) if unexpected repairs need to be made after move-in.
• Earnest money deposit. Whether buyers are trying to reduce their risk of something going wrong during closing or strengthen their offer, they can negotiate a lower or higher earnest money deposit with a counter offer.
Being Timely and Responsive
Real estate offers and counter offers often come with a set expiration date, so time is usually of the essence. Forty-eight hours is a standard acceptance window in many real estate markets, but in hot markets offers might expire within 24 hours or less.
Some sellers take this concept to a whole new level, setting stringent requirements around offer acceptance. It’s up to buyers to determine whether or not they’re willing to reply quickly enough to meet the sellers’ time demands or risk losing the deal.
Trying Not to Take Things Personally
It might not feel like “all’s fair in buying and selling a home” since it’s one of the biggest financial transactions many will make in their lifetime. But buyers and sellers shouldn’t be surprised if it comes with a little bit of literal give and take.
And while it might seem like a personal affront to have a real estate offer rejected, it’s possible (and even likely) that the seller has multiple offers or was simply able to strike a better deal.
When push comes to shove and purchase comes to close, buying a house is a matter of business, no matter how personal the home buying journey can feel.
Real estate counter offers are a common form of business negotiation, and a first step in making a counter offer is knowing what can be negotiated. Being cognizant of counter offer etiquette can be helpful.
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