What Is a Counter Offer in Real Estate?

When preparing to purchase a home, the counteroffer is the final hurdle. It means the seller is interested in selling to you if you're willing to find a compromise. As the name implies, a counteroffer is the seller's response, or counter, to your original offer. A counteroffer is usually a higher price or different terms. You can also make a counteroffer back. Read on to understand what a counteroffer is in real estate and how to successfully negotiate the final sale. 

Understanding Counteroffers in Real Estate

It's an exciting moment when you make an offer on a home. But what happens next is up to the seller. The seller can accept, reject or make a counteroffer to the bid offer. Sellers make counteroffers if they're not happy with the buyer's offer. For example, they may want a higher price or an increased earnest money deposit. 

When you receive a counteroffer from the seller, you can accept, reject or make a counteroffer. This negotiation can involve a single counteroffer or longer negotiations. 

Counteroffers often involve changing the price, increasing the size of the earnest money deposit or refusing to pay for certain fees or inspections. Sometimes, they involve minor modifications, like changing the personal property included in the sale. 

How Counteroffers on a House Work

The counteroffer can involve major changes in the sale price, minor modifications in contingencies or amendments to include personal property. Sometimes, the buyer and seller may verbally agree to the counter before drawing up a contract. Read on to understand the common changes you might see in a counteroffer. 

Sale Price

The sale price is the most common point of negotiation in a counteroffer and the most substantial. Sometimes, buyers and sellers will counter and recounter the sale price multiple times. The changes in sale price could be minimal or substantial depending on the sale price, original offer and the market. 

For example, if you make an offer under the asking value and include a compelling personal letter, the seller may decide they prefer to sell to you. But if they received other offers at or above asking, they may choose to make a counteroffer and see whether you can meet those offers before accepting another. 

Closing Costs

In most cases, the buyer will pay closing costs. However, in some cases, the seller may cover the closing costs to facilitate the sale, especially for buyers with limited cash reserves. 

Closing Date

Buyers may offer a shorter closing date or a closing without contingencies to make their offers more attractive to sellers. Sellers may also request a shorter closing in their counteroffer.

Earnest Money Deposit Amount

Many times, sellers will negotiate a higher earnest money amount, especially in a competitive market where they'll make other offers when they take the house off the market.  

Buyer-Requested Contingencies

In some cases, buyers may include contingencies the seller isn't willing to meet. For example, the seller might want to have deposits released early or not be willing to pay for certain inspections or fees. Sellers may also request a modification to contingency timeframes or choose to exclude personal property from the purchase. 

Pros and Cons of Counteroffers in Real Estate

Making a counteroffer in real estate has advantages and disadvantages. Here's an overview of why you should consider negotiating as a buyer. 

Pros

• You could secure the house you want with a compromise
• Potentially secure the home for less money 
• Secure better terms
• Willingness to negotiate can help you stand out from other potential buyers

Cons

• You'll have to give something in the negotiation and may end up paying more than you can comfortably afford. 
• If the seller's counteroffer is unreasonable or unattainable for you, you'll be forced to walk away. 

What to Do if Your Counter Offer on a House Is Rejected?

If your counteroffer on a house is rejected, you have a few options. You can always make a new offer, accept the seller's previous offer or make another counteroffer. In some cases, it means you'll lose the home. However, you can always make another offer or consider other properties. 

When to Accept a Home Seller’s Counter Offer?

If the seller's counteroffer is a reasonable compromise or is an offer you can meet, you can accept it. However, if it is beyond your budget or has other contingencies you cannot meet, you can also make another counteroffer. 

Before accepting a counteroffer, consider:

• Can you afford the counteroffer amount or agree to the contingencies without the risk of significant loss?
• What is the current market situation? Is it a buyer's market or a seller's market?
• How competitive is the market? 
• Are there likely several other potential buyers?
• Is the house your first choice or only choice?
• Can you offer something else significant in a counteroffer?
• Will your mortgage preapproval cover the counteroffer amount?
• Can you get a government-backed loan with lower interest rates or a lower downpayment to strengthen your offer?

Should You Make or Accept a Counteroffer?

You can make a counteroffer if you think the seller is willing to negotiate or believe you can meet in the middle. However, in highly competitive markets, you risk losing the property. You'll want to discuss options with your real estate agent to understand the market and consider your budget and whether you can meet the counteroffer before deciding to accept. Ready to prepare with mortgage preapproval? Learn more about how to get approved for a mortgage here. 

Frequently Asked Questions