Negotiating Counter Offers When Buying a House

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Note: This article is part two in a two-part series on buyer-seller negotiations. You can view the first part of this tutorial here.

In the previous part of this lesson, I explained how to put together your offer when buying a home. We also talked about the standard parts of a real estate purchase agreement. Now let's look at some strategies for negotiating the counter offer with the seller.

The Seller-to-Buyer Counter Offer

So you've done your market research, and you're ready to make an offer for the home. You decide to make an offer of $275,000. You're asking for a closing date 30 days from the time of acceptance. You have a contingency for the home inspection and also for your financing. You're not asking for any additional personal property, aside from the home itself. You put a 48-hour sign-back requirement on the purchase agreement, and then you presented it to the seller.

What happens next? It could be one of three scenarios:

  1. The seller accepts your offer without any conditions, and you jump for joy.
  2. The seller makes a counter offer to adjust one or more of the conditions mentioned above.
  3. The seller ignores your offer entirely, possibly because it was much lower than the asking price.

There's not much to say about the first and third scenarios. At least, not within the context of this article. So let's zero in on scenario #2. The seller makes a counter offer back to you. In real estate terms, this is appropriately referred to as the seller-to-buyer counter offer.

In most cases, the counter offer will include changes to one or more of the following items:

  • Sale Price
  • Closing date
  • Contributions toward closing costs
  • Contingencies requested by the buyer
  • Earnest money deposit

The sale price is the most commonly changed item in the seller-to-buyer counter offer. The seller might change this number in one of two ways. They might offer a price that is somewhere in between your offer and the original asking price. Or, they might counter back with their original asking price.

The second scenario (countering with the asking price) means they are not willing to negotiate on price. But if they give you a counter offer below the original list price, the negotiations are on. You can then choose to accept the seller's proposal or make another counter offer back to them.

The seller might also make changes to the closing date. They can make this change alone, or in conjunction with other changes to the sale price, contingencies, etc. In our scenario, you asked for a closing date 30 days from acceptance. But maybe the seller needs more time to pack up and move. So they sign a counter offer back to you proposing a 45-day escrow period. Again, you can accept it or not.

In most cases, the buyer will accept the seller's proposed changes to the closing date, if it's not a big difference.

The seller's counter offer might also address any contributions toward closing costs. For example, let's say you ask them to cover $6,000 worth of your closing costs. This is a common strategy in a buyers market, but it doesn't always work. The seller might simply say no to this request. They could also agree to contribute $6,000 toward your closing costs, while increasing the sale price by $6,000. In this scenario, they are essentially allowing you to finance your closing costs into the loan.

Lastly, the seller can make a counter offer that rejects or modifies certain contingencies you made in the purchase agreement. Sellers almost always accept the home-inspection contingency, as well as the financing contingency. They do this because they know most buyers will refuse to move forward without those contingencies.

But if you try to make the agreement contingent upon the sale of your current home, the seller might shoot you down. This is especially true in a slow real estate market. You might find it hard to negotiate this aspect of the counter offer.

Negotiate With the Market in Mind

How you negotiate the seller's counter offer will also depend on the type of market you're in. Do you know if the seller has multiple offers on the house? If they do, you need to tread carefully. If you're offering a lower amount and asking for a lot of contingencies, the seller could take another offer over yours.

Here's a real-life example for you:

When we sold our home in Texas, my wife and I were lucky enough to get a handful of offers within the first ten days. One of the buyers requested $6,000 in closing costs, while the others did not. They were also offering $15,000 less than our asking price (and the house was competitively priced to begin with). We ignored these buyers with good reason. They asked for too much and offered too little. We made a counter offer to another buyer for the full asking price. They accepted, and that was the end of it.

When you negotiate the counter offer with a seller, you have to be reasonable. It's not personal. It's just business. Both parties want something out of the deal, so both parties have to be willing to bend.

In a buyers market, you have much more leverage in terms of the purchase agreement. If the seller hasn't received a single offer in over three months, they will be more willing to negotiate with you. They may accept a lower sale price, a shorter escrow period, or even a contribution to your closing costs. They might not even make a counter offer back to you. They might simply accept your initial offer as-is.

In a seller's market, where homeowners are likely to receive multiple offers, you need to be careful what you ask for. In this type of market, the seller's counter may come with an unofficial "take it or leave it" clause.

So it all comes down to the type of market you are in, and the amount of leverage you have. And this is where your real estate agent's experience will prove invaluable.

This article explains how to negotiate a counter offer when buying a home. If you would like to learn more about this stage of the home-buying process, you can use the search box at the top of this website. We have articles that cover every step of this process. So you are bound to find information you need.