Let’s talk about How to Make a Counteroffer. There is a huge mistake I see sellers making through their agents. This mistake is as old as real estate, but it’s still popular. If you’re a buyer who will be making an offer on a home, it might be helpful to know what to do if this happens to you. If you’re a seller, you don’t need to make a common mistake some sellers make when they receive an offer. Offers are so few and far between these days, you cannot afford to make a mistake and chase a buyer away. Knowing how to make a counteroffer could save your transaction.
How to Make a Counteroffer
Believe it or not, some sellers who are lucky enough to receive an offer in this real estate recession reject the offer and do not even make any kind of counteroffer. They literally kill the transaction by letting it die at the first offer. So what could a seller (and perhaps their agent) be thinking when they reject an offer and make no counteroffer?
If a buyer makes an offer that is substantially less than the seller is asking, a seller might think he knows how to make a counteroffer by not making one. In other words, some sellers think it is an intelligent negotiating tactic to simply reject a low offer with no counter. There are two reasons a seller will justify this thinking. Some will take offense at an offer they think is too low. This is a mistake.
How to Make a Counteroffer – Rules
One of the most important rules in negotiating is that “attitude has no place in negotiating.” Another related rule is “arrogance has no place in negotiating.” Still another related rule that should be kept in mind is, “This is America and we live in a free enterprise system where neither buyers nor sellers are dictators. Everyone is free to negotiate their best deal.” When a seller rejects an offer with no counteroffer, he is violating all three of these rules from a buyer perspective.
A seller may be thinking the offer is ridiculously low and that no counteroffer is sending a message. It is sending a message, but it’s sending the wrong message. The message it sends is not what the seller thinks. If the seller is responding out of “an attitude” or “arrogance,” he may be thinking that the offer is so low, the buyer needs to be taught a lesson, or that by not making a counter the buyer will realize how foolishly low the offer was and will re-write the offer much higher. None of those mind games work with buyers.
Buyers will often walk away since the seller is sending one very loud and clear message: “I do not negotiate.” Some sellers actually treat a negotiation as though it is a hostage situation, and they take the position that they do not negotiate anything they deem unreasonable. That’s an excellent strategy to drive a buyer away. “I do not negotiate” is not one of the rules when it comes to how to make a counteroffer.
The wise seller (through their agent) understands how to make a counteroffer. Perhaps the better way to say that is that they understand how not to screw it up. That means whatever the offer, a seller makes a counteroffer . . . every single time. Notice I did not say how much of a counteroffer, or how to determine the amount of the counteroffer. That will have to be another discussion, but the key here is that a counteroffer should be made every single time. A counter can meet the buyer halfway, a quarter of the way, or a counter might be $1.00 off the listing price. The point is, an intelligent seller does not let a qualified buyer walk away without a counter that keeps the offer alive.
A seller should humbly consider an offer, even if it is much lower than hoped. Every offer sends a message. The message may be, “Your listing price is way too high,” or “Your listing price is too high,” or “Your listing price is a little high,” or “Your listing price is reasonable, but I want to try to get you down a little.” A full price offer that matches the listing price is also sending a message, “Your listing price is reasonable, and I think if I don’t offer full price, someone else will.”
Humility requires that a seller re-evaluate his listing price if he receives an offer for a lesser amount. I’m not suggesting that every buyer will make a reasonable offer. The focus of this article is how to make a counteroffer from a seller’s perspective. Right now there are listing prices in the Sequim MLS that are reasonable, but there are also many that are grossly overpriced. If you ask every seller in the MLS if their listing price is justified, what do you think they would say? Right.
The entire process of an offer, a counteroffer, and perhaps a counter to the counter, is an educational process for both the buyer and seller. Each party’s response is sending a message, and intelligent responses are based on fully informed parties who have examined market prices, comparables that have sold recently, and other relevant factors. Each time one of the parties makes an intelligent counter, he is involved in educating his adversary, and hopefully that adversary (the buyer or seller) is learning something he didn’t know each time during the process. Ultimately, the parties in a successful negotiation will arrive at mutual acceptance, having communicated effectively and educated each other to the point of reaching an agreement. This process works most effectively if both parties’ Realtors are experienced negotiators and professionals in how they communicate with each other. You should know that if one of the Realtors does not have the experience or professionalism necessary, he or she can literally bring the negotiations to an end unnecessarily.
How to Make a Counteroffer – Success
If a seller knows how to make a counteroffer, they can often put a deal together and actually close the sale. If you’re a buyer, you can see how valuable it would be to understand the psychology of sellers, no matter how they respond to your offer. For sellers without experience in negotiating hundreds of sales, this is where they must rely on the experience of their Realtor. This is why I’ve written elsewhere that a Realtor can either make you money or cost you tens of thousands of dollars. How to make a counteroffer is one vital area where experience pays.
Last Updated on July 1, 2012 by Chuck Marunde
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