If you have already put in a few offers on real estate, you are ready for this chapter because you have probably received some counter offers from the sellers. Counter offers are responses to offers and are the primary way real estate negotiations take place. Any time an offer on real estate is made there are three possible outcomes.

Offer Outcomes

  • Acceptance – the seller accepts your offer as is
  • Rejection – the seller rejects your offer
  • Counter Offer – the seller may come back and make you a different offer than what was offered in your original offer

For example, if a property is listed for $300,000 and you put in an offer at $275,000, the seller may come back and say “we will sell it to you at $290,000, all other terms to stay the same.” That is the seller’s counter. The next step will be your acceptance, rejection or counter.

Understanding Counter Offers

If you are entering into negotiations on real estate you need to understand how counter offers work. Not understanding could prove to be a costly mistake. A counter offer is an offer by one party that has anything different from the terms of the original offer. A counter offer is a rejection of an offer. Therefore, making even one seemingly insignificant change to an offer rejects that offer.

For example, let’s go back to the property above listed at $300,000 and your offer of $275,000. If the seller came back and countered your $275,000 offer with $290,000 they are legally rejecting the offer of $275,000. Therefore, if you reject their counter of $290,000 they cannot come back and say they will take the $275,000 unless you agree. You are no longer locked in on your offer of $275,000 because the seller rejected it by offering $290,000.

Tips for Negotiating on Real Estate

Purchasing real estate is a negotiation. This means that both parties need to be willing to compromise to make both sides happy. You must leave negotiation room in your original offer, unless you specify in advance. If you make an offer below list price and the seller counters, they expect you to be able to come up at least a little bit. In the example above, the seller was willing to come down $10,000 in their price. They will likely look at it as you being unfair if you stay firm at the $275,000.

If you are making a highest and best offer up front, specify that in your offer. “Highest and best” means that you will not be going up any higher in price. At least then the seller knows where they stand. No one wants to negotiate with themselves. The advance warning will let them know that counter offer attempts are going to be futile.

Be willing to change other terms. Perhaps you’ve gone as high as you can on the price. A good way to still negotiate without going up in price is to change other terms. Instead of going up in price, offer to close faster, put down a larger deposit, make the deposit non-refundable, or remove a contingency. These types of changes affect your offer and can make it stronger, but you do not have to sacrifice price.

Do not get too emotional. The negotiations can be the most emotional part of the buying process. Do not forget your investment criteria that you have already set. If you capped yourself at a certain price, make sure you stop when that threshold is reached. There are millions of houses out there and you can continue to look if your reasonable offer is not accepted. Falling in love with a house before it becomes your home can be a costly mistake.

Stick to your guns, make wise decisions, follow the advice of your real estate team and eventually one of your offers will be accepted. However, the acceptance of the offer does not end the process. You still need to have the follow up needed to close the deal.

➡️ Chapter 38: Closing Your Real Estate Transaction