What is a Counter Offer and when does it occur?

A counteroffer is a response made by either the buyer or the seller in a real estate transaction after the initial offer has been presented. It is essentially a rejection of the original offer and a proposal of new terms that the responding party finds more acceptable. Here's how it works:

Understanding a Counteroffer

1. When a Counteroffer Occurs

• Seller's Counteroffer: When a buyer submits an offer to purchase a property, the seller may not agree with the terms of that offer (e.g., the price, closing date, or contingencies). Instead of accepting the offer, the seller can issue a counteroffer with their preferred terms.
• Buyer's Counteroffer: If a seller counteroffers, the buyer can either accept it, reject it, or submit a counteroffer of their own. This back-and-forth can continue until both parties agree on the terms or decide to walk away.

2. Common Reasons for a Counteroffer

• Price: The most common reason for a counteroffer is disagreement over the purchase price. The seller might counter with a higher price, or the buyer might counter with a lower price than the seller's original counteroffer.
• Closing Date: The seller or buyer might want to adjust the proposed closing date to better suit their needs.
• Contingencies: The seller might want to modify or remove certain contingencies (such as inspection or financing contingencies) included in the original offer.
• Inclusions/Exclusions: The seller might want to exclude certain items (like appliances or fixtures) that the buyer initially requested, or vice versa.

3. How to Respond to a Counteroffer

• Accept the Counteroffer: If the terms of the counteroffer are acceptable, the other party can accept it, which creates a binding agreement.
• Reject the Counteroffer: The other party can simply reject the counteroffer, ending the negotiation.
• Make Another Counteroffer: If the other party wants to continue negotiating, they can respond with their own counteroffer, proposing new terms. This begins a new round of negotiations.

4. The Impact of a Counteroffer

• Legal Binding: A counteroffer nullifies the original offer. This means that once a counteroffer is made, the original offer cannot be accepted unless the counteroffer is also rejected.
• Negotiation Process: The process of making and responding to counteroffers is a negotiation. Each party aims to reach an agreement that satisfies both sides, but there’s always the risk that negotiations might break down if common ground cannot be found.

5. Timing and Expiration

• Response Time: Typically, counteroffers come with a time limit for acceptance, after which the counteroffer expires. This encourages prompt decision-making.
• Market Conditions: In a hot market, a seller may issue a counteroffer quickly, hoping to push for better terms, while in a slower market, they might be more willing to accept the initial offer.

Example of a Counteroffer

• Original Offer: A buyer offers $300,000 for a home with a closing date of 30 days and requests that the seller includes the refrigerator and washer/dryer.
• Seller’s Counteroffer: The seller counters at $310,000, agrees to the closing date, but excludes the washer/dryer from the sale.
• Buyer's Response: The buyer can accept the counteroffer, reject it, or make another counteroffer (e.g., $305,000 including the washer/dryer).

Final Notes

Counteroffers are a normal part of real estate negotiations and allow both the buyer and seller to find mutually agreeable terms. It’s important to carefully consider each counteroffer and consult with a real estate professional or attorney if needed, especially since once a counteroffer is accepted, it becomes a legally binding contract.