Selling Step 5: Offers, Counteroffers and Negotiation
Selling your home involves both business and personal issues: you will have people looking at your house, and buyers presenting offers and counteroffers; and you’ll have to deal with bargaining, negotiating and signing documents.
REALTORS® assist owners in the offer, counteroffer and negotiation process, offering advice and counsel as offers are received and by working closely with legal counsel, tax specialists and inspectors as required.
What is an Offer?
When you put your home on the market, you are essentially making an offer to buyers: for a given number of dollars and other terms they can acquire the home. Buyers, in turn, can respond with several options:
- accept the offer
- decline the offer
- make a counteroffer
The process of making offers varies around the country. Typically, the buyer’s agent will present a written offer to the seller through the seller’s agent. The seller, in turn, may accept the offer, decline it or make a counteroffer.
What is a Counteroffer?
A counteroffer is nothing more than a new offer with different terms. Offers and counteroffers reflect the back-and-forth activity of the marketplace. It's a common, efficient and practical process - but also one that may contain tricky clauses and hidden costs. Because of this, and because counteroffers are common, it's important for buyers to remain in close contact with a REALTOR® during the negotiation process so that any proposed changes can be quickly reviewed.
What is an Acceptable Offer?
The goal of every seller is to have a line of buyers outside the front door, each bringing higher and higher offers. And while this has been known to happen, in most markets there is some balance between the number of buyers and sellers. To determine whether a buyer's offer is acceptable, the seller should consider the following questions:
- Has the buyer accepted the asking price or something close?
- Has the buyer buried thousands of dollars in discounts and seller costs within tiny clauses and contract additions?
- Is there a possible better deal than the buyer's offer? If a home has not attracted an offer in months, then the seller needs to recognize that each month costs are being incurred for mortgage payments, taxes and insurance.
- Do you have enough time to wait for other offers?
- What if no other offers are received?
- What if several offers are received? Do you choose the higher offer from the purchaser with questionable finances who may not be able to close, or a lesser offer from a buyer with preapproved financing?
- What are the contingencies and what time period do they last for if other offers are received?
In each case, the owner - with assistance from a REALTOR® - will need to carefully review offers, consider marketplace options and then determine whether an offer is acceptable.
Contingencies and “Subject to” Clauses
Buyer offers often contain contingencies or “subject to” clauses that must be met before the contract is considered binding. Contingencies can include the following:
- approved financing
- buyer selling an existing home
- satisfactory home inspection report
- test results for environmental factors including radon, mold and water quality
- termite inspections
Work with your real estate agent to make sure that any buyer contingencies have a time clause, also called a kick-out clause, which limits the contingency to a short time period (say 12, 24 or 48 hours) should you receive another acceptable offer. This makes sure you are able to pursue other offers without undue restraint.
How Do You Negotiate?
No aspect of the home buying process is more complex, personal or variable than bargaining between buyers and sellers. This is the point where the value of an experienced REALTOR® is clearly evident because he or she knows the community, has seen numerous homes for sale, knows local values and has experience negotiating realty transactions. Also, your agent, from experience, can help you avoid getting locked into a deal that’s likely to fall through because of the prospective buyer’s finances.
Real estate bargaining typically involves compromises by both sides. It's not war; it's not winner-take-all. Instead, negotiating should be seen as a natural business process: buyers should be treated with respect, and owners should never lose sight of either their best interests or their baseline transaction requirements.
There are a lot of considerations, not just price, in making and negotiating offers. This is where the working with an experienced REALTOR® can guide you to a win-win negotiation.