First-time buyer expectation: You submit a bid, the seller accepts with glee, and you’re well on your merry way toward purchasing that dream home.
First-time buyer reality: You submit an offer, and the seller says, “Close…but no cigar,” and then the counter offers begin like a game of ping-pong.
Truth be told, counter offers are par for the course, but that doesn’t make negotiating any less stressful. During any house negotiation, you’ve got hundreds of thousands of dollars on the line. Emotions can run hot on both sides. Price is often the biggest point of controversy, but as they say… everything in real estate is negotiable — repairs, closing costs, who gets to keep the fridge, you name it. It’s all up in the air.
As a buyer who’s never done this before, going up against an experienced seller in offer negotiations can feel a little like David against Goliath. Not to worry — we’ve got the pro tips you need to follow perfect real estate counter offer etiquette, navigate the intense back-and-forth like a pro, and put your best foot forward without busting your budget.
Level up your negotiations by getting preapproved for a mortgage
Before you enter into any negotiations at all or put an offer on the table, speak with a lender and get preapproved for a mortgage.
“I get all my clients preapproved upfront because you’d be surprised by how many people declared bankruptcy or they’re looking at $300,000 but instead qualify for $200,000,” says Heather Moorefield, a top agent in Williamsburg, Virginia. “Also, if you’re in a multiple-offer situation, it does help if we’re preapproved so that we can get our offer in quick enough.”
If you make an offer for a loan amount that you technically won’t qualify for, then you’ve wasted your time along with the seller’s — not exactly a polite thing to do.
Go in strong, but not at 100%
If you want to get off on the right foot with the seller, lowballing them isn’t the way to do it. An offer is typically considered a “low ball” if you’re coming in at 15% or more below market value.
Outside of those circumstances, keep in mind that the top priority of most sellers is to get the best possible price for their home, so offers that appear to be a joke could strike a nerve. In addition, sellers have no legal obligation to respond to your offer at all so you need to at least get their attention.
A “strong” offer is one that’s backed by what’s happening in the market. With the help of your agent, do some research on how the seller’s price compares to what you believe to be is fair-market value. You can do this by checking out similar recently sold properties in the area (these are called “comps”) to gauge whether the seller is high, low, or hitting the sweet spot with their asking price.
“We usually negotiate less because we come in with a stronger offer, and it looks better to the seller,” says Moorefield.
However, that doesn’t mean that you have to come at the seller with a full-price offer right out of the gate.
“On average sellers probably counter twice in our area,” Moorefield says, speaking to the norms of her market. “So I always have my buyers start off with some wiggle room. The offer that they submit at first is not the offer that’s going to be accepted. We start lower to get to the point to where they’re aiming at.”
Don’t get tunnel vision on a baseline counter number
By the time you’re in the heat of counter offer negotiations with the seller, you should know your budget inside and out. It’s critical that you’re already confident with what would be comfortable monthly housing payment (including your mortgage principal and interest, taxes, insurance, and maintenance) and how much you can afford to pay as a lump sum at closing. (HomeLight’s Simple Home Affordability Calculator is a great tool to help you kick off this process).
On top of the down payment, buyers are on the hook to pay closing costs, which can add up to as much as 5% of the total loan amount — and are an expense that takes more than half of homebuyers by surprise, according to a report from ClosingCorp.
You need this budgeting information, and to have a comprehensive picture of what it costs to buy a house in order to negotiate your counter offers wisely. In fact, second to the purchase price, closing costs are often the most negotiated line item between buyers and sellers.
“The lenders that I work with will give my buyers worksheets upfront explaining what the closing costs will be,” says Moorefield. “That tells me how much I need to ask the seller for in negotiations. We’re very tight on our numbers based on what the buyer is already approved for.”
Although clients tend to want to draw hard lines on price — like “I’ll only go up to $275,000” — Moorefield says that’s often the wrong approach to negotiations.
“I focus with buyers upfront: Don’t get set on the bottom line counter number. Instead, I show them what the total cost would be upfront at the highest counter — at, for example, the list price. So then they know if we come down $5,000, that it may only change their monthly payment by $20 from the lender. And once they know that upfront, then the emotional standpoint of the countering goes away.”
But how you respond to a counter offer is highly personal. Moorefield once had a client who was a single mother and told her that the extra $20 a month was bread on the table. So Moorefield knew that if they moved forward in negotiations, she’d need to work with the client to find cheaper homeowners insurance, or ask for a lender credit to reduce her closing costs, if the seller wouldn’t budge on price. This is how having a top agent on your side can be invaluable in negotiations and beyond.
Respond to counter offers in a timely manner, but know that sellers may try to rush you
Counter offers typically come with an expiration date. In many markets, 48 hours is the customary acceptance window, but in a hot real estate market, an offer may only be on the table for 24 hours or less.
Moorefield recalls a situation where the seller gave her buyers a very tight turnaround: “The agent sent the counter offer to me at 5 o’ clock and asked for a midnight decision. I said, ‘Well, I’ll get to my phone right now, but I’m not sure if the buyers are going to respond before midnight’.”
All is fair in love, war, and negotiations, so if you get this kind of demand from a seller, you’ll have to decide whether you want the house enough to respond swiftly or risk losing out.
Get creative in what you ask for — everything is negotiable
As a buyer you can negotiate on more than just the purchase price and closing costs, and doing so is well within the bounds of counter offer etiquette. If you can’t get the seller to budge on the big-ticket items, you can also negotiate on the following:
- Possession date
You could offer to give the sellers more time to move out in exchange for something you want, or request to bump up the possession date so that you can move in faster. Whatever the case, you can use the possession date as a point of leverage.
- Earnest money deposit
Earnest money is a deposit you put into an escrow account after signing the contract (typically 1% of the purchase price) to show the seller that you’ve got skin in the game. If all goes as planned, your earnest money will count toward the sum you owe at closing. But if you decide to back out of the contract (and aren’t protected by a contingency) the seller can claim your deposit. There’s no “set” earnest money amount in a real estate transaction, so you can also increase or decrease the earnest money amount during offer negotiations — for example, as a way to strengthen your offer or reduce your risk if something goes awry during closing.
- Home warranty
If you’re putting an offer in on a house with a lot of old systems and appliances, it may be fair to ask the seller to cover the costs of a one or two year home warranty (costing $350 to $600 a year on average) so that if something breaks down after you move in, you’re covered during a period when you might be fairly cash-strapped from your recent home purchase.
- Personal property
You can negotiate for the seller to leave certain pieces of furniture, window treatments, or even the pool table — make sure whatever you ask for (and agree to) ends up in writing in the contract.
Avoid knee-jerk reactions, and don’t take anything personally
When you get a counter offer, your first instinct may be to immediately reject or accept it outright. But, if you have a little time to respond — go ahead and take a walk or sleep on the decision. It may be just what you need to get clarity on the best way forward. And while it feels personal to have your offer rejected, try not to take it to heart. The seller may have a few offers or simply wants a better deal. At the end of the day, it’s just business.
If you’re going to reject a counter, be polite about it
When it appears that you and the seller can’t come to an agreement, or that meeting the sellers’ requests would stretch you too much financially, you can and should feel free to walk away. All you have to do is politely decline the counter offer (in other words, don’t sign it, and confirm with your agent that you don’t want to negotiate further). As a courtesy, your agent will communicate with the listing agent about your position and decision.
Always disclose whether you’re making offers on multiple properties
Let’s say you’re trying to buy a house in a competitive market and find yourself down on your luck. You’ve submitted an offer on several homes but lost out to another buyer every time. You feel that delays during the offer stages are causing you to miss out on bidding for other homes.
By the time the seller rejects you, the other house you had your eye on goes under contract.
In this case, your agent may recommend that you start to make offers on multiple homes at the same time. However, this strategy can backfire if you don’t follow protocol, and it’s not always legal (rules vary state by state).
If you go this route, your agent should let the listing agents of any homes you bid on know upfront that you’re making multiple offers on different homes at the same time. Honesty is the best policy here. Be aware, too, that some states have what’s called a “good faith and fair dealing” covenant that applies to contract law, which could make bidding on multiple properties at the same time (that you couldn’t afford to buy at once) illegal. If this is the case, you should avoid a multiple-bidding strategy.
Got an offer accepted? Congrats! The seller should disclose that they’re under contract
The Code of Ethics set by the National Association of Realtors (NAR) holds agents who are also Realtors to a certain standard of conduct. One rule Realtors have to follow is to disclose when their seller accepts an offer from a buyer to other buyer’s agents, even if that offer comes with contingencies.
So once you’re under contract, your seller shouldn’t be fielding any other offers. Because at the end of the day, real estate counter offer etiquette benefits not just sellers, but also you as a buyer. No matter how heated any negotiations become, civility and professionalism are paramount to both sides.
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