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You’re ready to sell your house. You have your real estate agent, your house is in tip top shape. It’s been appraised and your home is listed on the market and ready to sell. Feeling good about having done your due diligence, patiently you await your perfect offer on the table (or shall we say, counter).
Immediate, or maybe with a slow start, the offers come trickling in. Your agent leaves you a message; someone has made an offer on the house. Excited, your wait for your agent to deliver the big news, thinking to yourself, I knew they would see the value in my house.
Here it comes; you brace yourself. Shocked, you look at it again. And again. To say the least it’s not what you were expecting. The price is considerably lower than you’d prepared for, or maybe you can’t even see through all the contingencies. Really, is this what I should expect?
It’s the normal process of selling almost anything; real estate can just appear more intimidating. Don’t worry or be overwhelmed. What really happened here is a buyer saw your house, liked it, saw potential in it and wants it—seeking the least amount of risk.
A buyer’s offer & contingencies
Every offer you receive is on a pre-printed contract called a residential purchase agreement; it’s not legally binding and without your signature the contract is simply an “official” offer.
There are several contingencies that are common, if not standard; and you as the seller can be proactive by preparing for these ahead of time:
– Buyer’s home inspection
– A financing contingency
– Home insurance contingency
Pursuing the advantage, a buyer uses the standard document to include all the terms they would like the deal to include, such as the following:
– Closing costs
– Closing Date
– Down payment
– Property buyer wishes to have included in the purchase
– Buyer sells their home first
You now have two choices; you can either accept the buyer’s offer, or choose to make adjustments to it; this is called a counteroffer. Knowing the current market in your area will better prepare you to handle contingencies in the negotiation process.
Negotiation process – making a counter offer
The buyer’s first offer is hardly ever the deal closed upon and if you don’t accept you’re expected to make a counter offer. Take time to go through the contingencies, seeing what you view as fair and reasonable. With your finger on the pulse of the current market you will be able to make a firm stance on your price. With this in mind, however, don’t come back with that number in your head; you want to leave a little wiggle room; set it a little higher so the buyer can have some control.
Just as the buyer’s first offer is usually a “low-ball” offer, your counteroffer should not be your best or lowest. But, you do want to think carefully before you make any counteroffers. Once signed, the counteroffer must be delivered to the buyer or the buyer’s agent in order to be binding. Here are a few good reasons that you want to keep in mind before signing a counter offer:
– You have legally rejected the buyer’s original offer. The original offer is cancelled out and you cannot go back to accept it if. It is obsolete.
– Your counteroffer is a NEW OFFER and it puts the ball back in the buyer’s court.
– Counteroffers always contain an EXPIRATION DATE. You can set the counteroffer to expire as soon as an hour if you wish, but it’s best to give the buyer a reasonable amount of time.
If the buyer fails to respond before the expiration date, the offer is obsolete and no offers remain on the table. Negotiations with that buyer can only be reactivated by the buyer submitting a fresh offer.
What the buyer does with your counter offer
When the buyer receives your counter offer, the buyer has three choices:
1. Accept the offer. The buyer does this by signing the counter offer before the expiration date and delivering the signed offer to you or your real estate agent.
2. Reject the offer. Taking no further action, the buyer can relinquish your counter offer. At this point, all deals are off the table and the buyer will need to submit a fresh offer.
3. Counter the counter offer. The buyer can make a second counter-offer, or even a third or a fourth, until you reach a deal. Thankfully, multiple counter offers are rare. Most well-advised buyers and sellers reach agreement after one or two rounds of negotiation.
What your Realtor® will (should) do
- Advise you when an offer is clearly unreasonable. You obviously have a price expectation that you and your real estate agent have discussed.
- Know if it’s a buyer’s market or a seller’s market. If it’s a buyer’s market, your real estate agent will know the probability of the buyer having acceptable second or third choice homes. In a buyer’s market, making a counteroffer – even a modest one – can be enough to drive the buyer to the next home on his list; whereas in a seller’s market, with a shortage of suitable homes for sale, the buyer is more likely to hang in for a few rounds of counteroffers.
- Investigate the buyer’s motivation. This is extremely useful knowledge that tells you what type of counteroffer will influence the buyer the most. Your buyer may see one deal more attractive than another. For instance, a counteroffer that reduces the closing costs and keeps the price the same may be enough to persuade the buyer to accept.
Set forth your goals with your Realtor® right up front. Think what’s most important to you; it could be the speed in which your house sells, or maybe it’s the dollar value. Just remember that a serious buyer’s offer is worth a lot more than a house that sits on the market for a long time. With your finger on the pulse of the real estate market, and a capable Realtor®, you should have a pleasant home selling experience.
Thinking of selling your house? Even if it’s early, one of our expert seller’s agents are here 24/7 to discuss options, supply information and answer any questions you may have. We can guide you along the way, and you can trust that what’s important to you becomes important to us. Feel free to use our instant home valuation tool. For a customized home valuation, click here to to see what your house could sell for today.