Structuring a Seller's Counteroffer
Negotiating a home sale is a little like playing cards. Both sides are advised to play their hands cautiously, revealing to the other players only what’s necessary. If you’re the seller, that means you will not know exactly how much the buyer can afford to bid for your home. If you’re the buyer, you will not know exactly how low the seller can go and still stay in the game.
Both sides may do a little betting and bluffing because no matter what market conditions dictate, most buyers believe that sellers put their homes on the market for a price higher than they expect to receive. And most sellers believe that buyers expect to pay more than what they first offer.
So let the poker-faced negotiations begin.
Dotting the I's
Let’s say you are the seller and you have in hand a written offer from a buyer who wants you to accept $20,000 less than your asking price. You are the only one who knows that you will be happy to accept $10,000 less than what you’re asking. And you don’t know that the buyer actually could afford to pay your full asking price.
But there’s more. The buyer’s offer is contingent on the sale within 90 days of a rental house he owns. You’ve been told to accept a contingent offer only if you are desperate to sell and have no other buyers in sight.
The offer includes a month-end closing date. Your homework indicates this has to do with when the buyer’s first mortgage payment will be due. There is no advantage to the seller.
The offer includes a list of property the buyer wants — even though your listing agreement specified a number of custom-made lighting fixtures and built-ins that you don’t want to sell with the house.
In other words, you and the seller don’t agree on much of anything. So let’s put together your counteroffer. Strike out what you want to change and write in your terms.
Price: Replace the buyer’s offer with a figure $2,500 less than your asking price.
Contingency: Simply strike that language.
Closing date: Cross it out and write in the 10th of the month.
Fixtures: Give up something. Attach an amended list of what you want.
Initial and date each line where you’ve made a change. Send the paperwork back to the buyer with a new deadline for her response.
What have you done? You’ve moved your position just enough to let the buyer know you want to keep the negotiation going while preserving wiggle room for later give and take.
The Buyer Responds
Within 24 hours you receive a phone call from the buyer’s agent. He wants to deliver a response to your counteroffer.
The buyer proposes to pay $10,000 less than your asking price; agrees to drop the rental property sale contingency; still wants to close the end of the month; and wants either the hammered steel and glass chandelier or the built-in entertainment center, but won’t fight for the rest of the light fixtures as long as you agree to replace them with something that works.
Obviously your buyer is compromising and still wants to buy your home. The buyer has dropped the most troublesome contingency and she’s agreed to let you keep your custom light fixtures. What do you really need to make a deal?
- More money?
- The chandelier?
- Different closing date?
Review your goals.
The Seller Responds
What if you hold out for more money — say $5,000 below the asking price. The buyer already is offering to let you have all the light fixtures. In return, you could agree to the buyer’s closing date and give her the entertainment center. Would you have any regrets? Would your financial needs be met? Would you be able to move out by the agreed upon date?
Another option: Since the buyer has agreed to a price you know you can live with — $10,000 below the asking price, you could agree to accept it. In return, you could insist on changing the closing date to one you like better and ask to keep both the chandelier and the entertainment center.
Decide what is most important to you and structure your counteroffer to fit your needs. With any luck at all, the next response you receive from the buyer will be a contract you can both sign and date.
A successful negotiation process of offers and counteroffers will leave both seller and buyer feeling good. Each will give up something; each will gain something.
Bear in mind that in the real world, you may live in an area that uses a two-step practice — a shorter document for the offer and a longer document for the detailed purchase and sale agreement. Or, you may be selling in an area that uses only the longer contract. When both parties sign any of this paperwork, it is legally binding.
And, as stated before, market conditions determine who has the most bargaining power and dictate strategy for both sellers and buyers.
Next article: You Should Be So Lucky - Multiple Offers
Previous article: Legal Consequences of Negotiations
- Last edited October 18 2007
We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.
Contributors to this article include:
- 0 Contributions