Make Your Best (Counter) Offer! © 2012 by Wayne D. Lewis, Sr.

See my other blogs @ www.richfitusa.com

It maybe the average buyer’s opinion that if you make an offer to buy a property, there should be no other response other than the fact that the offer is accepted.  In other words, the seller should take the offer that the buyer has made and should be happy.  Not so fast!  All offers are not created equal.  Certain components of an initial offer may set off a counteroffer.  How you respond to a counteroffer will determine whether or not you move forward on a sale.  While you may try to make an offer that the seller would accept, unless you know the seller personally, or the sale of the property has other certain components that are not obvious, you need to be prepared for a counteroffer from the seller.  Here are five things that will most likely set off a counteroffer from a seller:

1. An extremely low offer
2. Extremely low Deposit
3. Excessive requested Seller-to-Buyer closing costs
4. Time restrictions within the contract
5. Special Terms and Conditions

            Let’s take a brief look at these components and how you maybe able to either prepare for a counteroffer, or how you can avoid one with a first initial offer.

1. An extremely low offer- while it is understood as to why a seller would counter an initially low offer, few sellers expect a full price offer.  But, sellers have a clue about how much they are willing to accept.  What is behind what most sellers will accept has to do with settling an existing mortgage or, how much money they will need to either pay off other debts, or if they will use any proceeds to buy their next home.  There maybe other factors.  If any of these factors exist, a buyer can expect a counteroffer. 

How to avoid a counteroffer on price?  If possible, try to make an offer within 6 to 10% of the asking price.  This would only make sense if the asking price for the property is within the price range of other comparable properties.  Consult with your Realtor to determine comparable properties and how much they have sold.

http://homebuying.about.com/od/offersnegotiations/qt/CounterOffers.htm

2. An extremely low Deposit-How much of a deposit is satisfactory?  Usually10% of the offering price is the minimum that is asked for.  For example, a $100,000 offering price would suggest a $10,000.00 deposit.  However, in the absence of that amount, an actual $1,000.00 cash deposit (certified funds) with a $9,000.00 demand note could be substituted.  What this primarily means to the seller is that if a buyer defaults on the contract, the seller can demand the whole amount of the deposit, pending litigation or arbitration. 

How to avoid a counteroffer on a deposit? If possible, offer at least a 10% deposit.  Sellers are more comfortable if they believe that a buyer has a potential investment in the deal.  Sellers need to feel that buyers are serious about the purchase of their properties and deposits are one way of sending a clear message that you, as a buyer, are serious in your contractual offer.

http://www.ehow.com/how_2384428_handle-real-estate-counteroffers.html

3. Excessively requested Seller-to-Buyer closing costs-How much is too much?  First of all, the guidelines for seller-to-buyer closing costs are generally dictated by your loan or lender. Depending on the type of loan, a seller can pay up to 6% of a purchaser’s closing costs.  For example, on a $100,000.00 home, a seller maybe allowed to pay as much as $6,000 or $3,000, at 3% of the purchaser’s closing costs.  Your lender will advise you accordingly.  What becomes an excessive closing cost to a seller is relative.  Depending on the seller, and what they need to walk away with from the closing table, closing costs at 1% could be excessive.  How to avoid Excessive Seller-to-Buyer closing costs? Since it is all relative, it is recommended that a buyer asks for as much as possible, not to exceed 6%, or consult with your lender, where the max amount allowed may only be 3%.   Unless there are mandated seller-to-buyer closing costs, as with a VA loan, a seller could elect not to pay any closing costs.  For the buyer, that could mean an additional amount of money out of pocket.  To determine how much possible out of pocket that require, ask your lender for a preliminary estimate of closing costs.  You should check with your lender as it relates to all costs related to making a loan before making an offer so as to avoid any embarrassment prior to closing on your purchase.

http://www.selfgrowth.com/articles/A_Real_Estate_Counter_Offer_How_to_Work_it_and_How_Not_to_Blow_It.html

4. Time Restrictions within the Contract- If you look at most contracts (Louisiana only), you will find several references to deadlines.  For example, you have a deadline regarding financing, or providing proof of financing; there is a deadline to respond to the offer; there is a deadline to complete inspections and so on.  Any one of these time constraints are subject to negotiations.  Even if pre-printed in the contract, a seller may counter.   A seller may counter when you choose to close on the offer.  They may not want to close in 30 days, they may want to close in 60 days, or vice versa.  The seller may not want you to take 10 days for an inspection, they may want you to take 5 or 7 days, with a 72 hr response period still relevant, per the contract.  

How to avoid Time Restrictions within the Contract? You may not want to avoid those time restrictions if they are countered from your initial offer.  But if you accept any time changes, be sure that your lender and the title company can accommodate you, as a buyer.  Again, consult with your lender, if making a loan, regarding time factors for moving forward on an offer.   

http://www.reiclub.com/articles/negotiate-counteroffers

5. Special Terms and Conditions-What are Special Terms and Conditions? Examples of Special Terms and Conditions:
1. Seller to allow Purchaser 1 month’s stay in subject property prior to close at a rental amount not to exceed $600 with no deposit;
2. Seller to leave all window coverings in living room, dinning room and Master bedroom;
3. Seller to paint Master bedroom in a color to be chosen by Purchaser

            Special Terms and Conditions are just that: Special.  A Seller may choose to accept all, a portion of, modify a portion of, or refuse to accept the entire set of conditions.  If there is no response from the Seller to the Special Terms and Conditions when submitting a counteroffer, the Terms and Conditions are considered accepted.  Otherwise, look for a counter response under any condition that requires a seller do more than just sell their home.

How to make Special Terms and Conditions that minimize Counteroffers.  Special and Terms and Conditions should be well thought out by the Buyer.  If the buyer asks for something extraordinary of the Seller, it could result in the Seller turning the whole contract down.  So a Buyer should only consider asking for the Seller to paint a hall bathroom rather than a whole house.  If the whole house needs painting, a Purchaser should consider offering a price that realistically reflects the need for painting and arrange for a painting of the entire house once the house is purchased.  If the seller doesn’t like a tree that is against a house, ask for it to be cut away from the house rather than the whole tree being cut down. 

            By making a well thought out offer regarding Terms and Conditions, a Purchaser could possibly avoid a counteroffer from a Seller that result in a smooth transition in the purchase and sale of their next home, all other issues notwithstanding. 

            All of the above components pre-suppose that there is an initial offer.  All other aspects of the sale subsequent to an acceptance are not in play, and are subject to conditions and circumstances not addressed in this discussion.

            REMINDER: Even if the seller counters any part of the buyer’s initial offer, it does not mean that the buyer has to accept the counter. A change in an initial offer is a new offer.  What is basically happening is the seller is now offering their property for sale to the buyer, despite the initial offer.  Through a Counteroffer, what a seller is saying is: “I will sell you my house under these circumstances.”  The buyer is not obligated to accept those change of terms, and can, if the buyer so chooses, either resubmit the original offer, accept the change that the seller countered with, or make a change that addresses not only what the seller wants, but now, makes a change from the buyer’s original offer.

            What may constitute a best counteroffer is determined by a genuine agreement between Seller and Buyer.  That the offer and acceptance is the sum of a negotiation, made in good faith between two willing participants.  The counteroffer is an integral part of the sale and purchase of a home.  Whether it occurs during the initial offer, or during the process from inspection, to appraisal, to title work, a counteroffer will be subsequently made, and it is important that for both the Seller and the Buyer be able to make their best counteroffer at the beginning of the process so that there will be less to negotiate throughout the process, with the assistance of their real estate professional.

  

Opinions throughout this blog are only of this blogger and is not affiliated with nor are the opinions of Gardner Realtors, its associates or affiliates.  You are advised to consult with your Realtor for more up-to-date information.