Sunday, May 4, 2014

Counter-Offers

While visiting The Press Coffee & Lounge in Rochester yesterday, I began to write an answer to Laura's question "How do buyers stand a better chance in counter-offering?"

Those few words followed by a question mark are the very essence of what it means to negotiate.the purchase of a home. And, there are so many variables.

In order to simplify things a little, I've developed a small matrix to help explain my answer.  Click the link under the picture below for a readable diagram.

Let's start as the transaction begins.

Once a buyer has found a home, a purchase offer is drafted.  This agreement includes all of the terms and conditions pertaining to the particular transaction and each is important.  Who pays for what, the offered price, the closing date, the included personal property, inspections, contingencies, the type of financing, seller contributions and the status of the buyer's mortgage application are the most common.

Click link to enlarge
Once signatures are attached, the offer is presented to the seller.  The seller then has three options; 1) Reject the offer entirely, 2) Accept the offer as written or, 3) Counter some of the terms and conditions of the offer.  As number three is the most common, this is where Laura's question becomes the issue.

Hopefully, this buyer is working with a "Buyer Broker" Agent. - an agent representing the best interests of the buyer, not the seller.  This will help a great deal with the strategy of the offer presented as well as the counter-offer scenario. The buyer should be well informed as to statistical market conditions, subject property history and recently closed comparable properties,   But, make no mistake.  All decisions as to strategy are the responsibility of the buyer. Negotiating a possible counter-offer begins and ends with the buyer's initial offer.

The goal or main point of the question is assumed to be "How do buyers get the best price?" But there can be much more involved here. What is the buyer's motivation when they make an offer?  Is this their absolute dream house?  Are they under any time or location pressures such as school enrollments, job transfers or special medical needs?  Are they making an offer to try and "steal" a property?  Or maybe they're just testing the market as the house works, but there are many to choose from. When you combine this motivation with the market conditions, you see the offer strategy begin to take shape.

Anticipating what a seller counter-offer might be is also part of this strategy.  "If I do this, how will the seller most likely respond?" is a question which must be considered while drafting the original offer.

As you've probably determined, the answer to Lauren's question is not a one-size-fits-all. A purchase offer becomes an executed purchase agreement when the needs of both buyers and sellers are negotiated to the point where each party feels that the transaction makes sense to them.



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