Counteroffers: A guide for homebuyers and sellers

Quick insights

• Counteroffers in real estate are formal responses to an offer to buy or sell a home, made by either party in a transaction.
• There’s no limit to the number of counteroffers that may be exchanged; however, either party has the right to stop negotiations at their discretion.
• Counteroffers can include changes to the sale price, the inclusion of furniture or appliances, changes to the closing date and other aspects of the transaction.

In a real estate context, counteroffers are formal responses made by a buyer or seller during a property sale negotiation. By exchanging counteroffers, both parties can propose adjustments to the agreement that make the terms more palatable. In this article, we’ll provide examples to help you further understand what counteroffers are and the types of requests that are common with counteroffers in real estate. We will also discuss how to make counteroffers on a house as a buyer or a seller.

How counteroffers work

In most scenarios, the initial offer on a home comes from a buyer, followed by the seller issuing a counteroffer with their own adjustments (if desired). This can then go back to the buyer for an additional counteroffer, and so on. While there’s no legal limit to the number of counteroffers that can be issued, after a certain amount of back-and-forth, one or both parties may withdraw from the negotiation.

Example: Roof repairs

For an idea of what this exchange may look like in the real world, picture this. A buyer makes an initial offer on a home, requesting that the purchase price be reduced to account for necessary repairs that will need to be made to the roof. After considering the offer, the seller chooses to issue a counteroffer with an agreement to pay for repairs, using their own contractor, and keep the purchase price as-is. This counteroffer satisfies the buyer’s concerns about the roof, and they decide to accept it, moving forward with the sale.

The components of a counteroffer

A counteroffer is typically issued with a formal letter than includes pertinent information, such as:

• Proposed purchase price: The purchase price is typically a major aspect of all offers. While the price of a home generally represents its value, adjustments may be proposed to offset requests made by either party, such as the cost of roof repairs seen in the previous example.
• Closing date: It’s standard to include a proposed closing date with a counteroffer, as this sets a timed expectation for completing the process.
• Contingencies: These are conditions that allow a party to withdraw from a deal if they are not met, such as a contingency that requires a clean home inspection report. Another example would be a contingency that the home is formally appraised for the agreed-upon purchase price.
• Included/excluded personal property: It’s not uncommon for furniture, fixtures or appliances to be detailed as part of an offer or counteroffer.
• Closing costs: In some cases, a seller may offer to cover closing costs at their discretion or in exchange for various concessions made by the buyer.

For those operating without the assistance of a professional real estate agent, consider seeking out pre-written, templated responses to reference as examples.

The seller’s perspective: Issuing a counteroffer

In many cases, the listing price a seller sets for their home is set strategically, based on a combination of appraisal outcome and real estate comps (similar homes sold nearby). Depending on the current market, sellers may also pad their pricing, anticipating negotiations.

When you begin receiving offers, it’s up to you (with the assistance of any real estate professionals you hire) to determine their fairness, and to supply a counteroffer if needed. In general, the steps would include:

• Assess the initial offer: How far is it from the price you anticipated, and what sorts of requests are included? Do these seem like reasonable requests? As a seller, there may be the impulse to react quickly to keep negotiations moving, but it's important to take the time necessary to consider the offer carefully.
• Decide on adjustments: Are you willing and able to make changes relating to the price, terms or contingencies? How will these adjustments affect your financial outcome? Is there another offer on the table that could better suit your needs?
• Prepare a counteroffer: You’re not obligated to work with a real estate agent; however, their professional assistance can be helpful. Without it, you will need to draft a counteroffer letter that indicates the proposed terms. Including an explanation for your changes—such as, “we believe this adjusted price more accurately reflects the property’s value”—that can make your letter more comprehensive to the buyer.

The buyer’s perspective: Receiving a counteroffer

As a buyer, you want to make sure you’re paying a fair price, keeping in mind any repairs or adjustments that may need to be made after the home is yours. To get a sense of what a reasonable counteroffer is on a house, it’s important to reference comparable properties in the area. This can help you assess the pricing for a specific home you’re interested in. You may find that a home is overpriced (or underpriced), or that it’s been sitting on the market a long time—information that can be used as leverage when you make an offer.

So, what happens when a seller counteroffers? If your initial offer is countered, you have the option to accept, reject or create your own counteroffer. When preparing a counteroffer, be sure to use clear language in your letter that explains the adjusted terms you propose. Working with a real estate agent can help ensure that you craft a compelling counteroffer.

Final tips for smooth negotiating

For buyers and sellers alike, clear, transparent communication and an understanding of the other party’s needs could help negotiations. Respectfully seeking common ground and looking for solutions that benefit both parties is key. Bear in mind that aspects of your offer that you detail in print may become legally binding if it is accepted. Be sure to carefully consider your inclusions to avoid future disputes.

In conclusion

Negotiating counteroffers may initially seem intimidating to those who are not typically involved in real estate transactions. Working with a trained real estate agent can be a great help for those buying or selling a home. When it comes to understanding your financing options as a buyer, you may want to consider reaching out to a Home Lending Advisor at Chase.