Anticipate different scenarios:
A counteroffer is used to, in effect, accept some (or most) of the terms of the other party's latest offer, while modifying other items. There really isn’t any limit to the number of times that the buyers and sellers can counter each other.
When reviewing the offer, be sure to consider that there are several items (besides price) that could be unacceptable to you. However, coming back with a different price, a shorter time frame until the closing, different dates, terms, contingency modifications, etc. is expected–almost a tradition in selling a home, unless you initially get a great offer.
A typical offer/counteroffer example:
Let’s look at the basics of a typical negotiation on a home priced at $329,900.
- Buyers make a home purchase offer of $310,000 with possession at closing and want the appliances, including the newer refrigerator that the seller hadn’t listed as being included with the property.
- The sellers counter at $325,000, eliminate the refrigerator and want possession for 10 days after closing.
- Buyers counter at $318,000, but want possession at closing. The negotiations slow down. The next day the sellers offer to split the difference ($321,500) if the buyers will give them three days after closing for possession and they’ll throw in the refrigerator.
- The buyers agree to the price and refrigerator but will give 48 hours after closing for possession.
- The sellers accept this last counter offer.
An incentive could help your buyer:
Buyers may be short on cash or need cash for after-closing expenses. Or you could be searching for other incentives to make your counter-offer more attractive. Therefore, consider these counteroffer tactics:
- Paying for some of the buyers’ title insurance, closing costs and/or points.
- Pay homeowner’s association fees for a year.
- Look into buying down the buyers’ mortgage rate for the first year.
- Cover a year's cost for a lawn-maintenance/snow removal service.
- Pay or provide an allowance toward moving expenses.
- Provide the buyers with a home warranty.
- Pay for the lawn and pool services for a year.
- Offer a golf club membership, pool membership, or cable subscription.
- Offer an allowance to repaint, new carpeting or for window treatments.
Incentives, especially for first time homebuyers, can often do the trick.
Counteroffer give and take:
When a buyer asks for something, you should get something in return. This taps into the other person’s state of fairness.
It also slows down their future requests for something - as they see the consequence of their demands.
Countering the buyer's offer:
All sellers zero in on price. As you counter back and forth, each counter should have a smaller increment in the drop amount than your previous offer. This conveys that you are nearing your bottom line. Example: you drop $6,000 on your first counter, $2,500 on the second, and $1,000 on the third.
Suppose you counter the buyers' offer at $5,000 less than your asking price and the buyers raise their offer by an equal amount. If you suspect the buyer is going to match your counters, it's easy to see where the final price is headed. You now come down $3,000 and they come up three. If acceptable, keep going.
When you get to your bottom line, say, "This is really where we'd like to be." This is better than the emphatic, "This is as low as we're going to go."
The buyer stress factor:
Some buyers have a low tolerance for stress and submit their offer (or first counteroffer) with, “We really don’t like to go back and forth so here’s our offer.” The implication is it's their final offer. However, they’ve revealed a serious weakness. They can’t deal with stress and want it to be over.
If you feel there is potential for a deal, respond with, “We really like you as the buyers and feel good about your offer. If you’ll just consider a couple of changes to the agreement, I'm sure we have a deal here.”
First, go over your non-price changes. Then tell them that you really feel that “x” dollars will be fair. Then say nothing. Let them make the first response. They know that their acceptance would be all it takes to get your home and eliminate the stress. A counter from them would just add to their anxiety.
The good cop/bad cop technique:
If you are selling your home with a spouse or co-owner, you can always play good cop, bad cop. The essence of this technique is to make it sound like you’re on the buyers’ side.
One of you needs to be the contact person for all the negotiating. When you get the offer, say, “ Well, let me run this by my wife (husband).”
Then when you convey your counteroffer, say something to the effect, “Well, that's all she'd (he'd) come down” or “Well, it looks like we got the price down to "x" dollars, that's all she'd come down.”
When the buyers make their next counter, say, “I'll see what I can do. Let’s keep our fingers crossed.”
If things seem to stall, you can say, “We’re so close. We should be able to work this out.”
You, as the good cop, maintain the goodwill and relationship while appearing to be trying to get your mate to be more reasonable during the negotiations. It’s your delivery of empathy and sincerity that keeps the buyer/seller relationship personable and on track.
Counter by splitting the difference:
As both parties come closer together, there is the tendency for them to hold back on price concessions. They each sense the desire to win, but above all, not to lose.
If things seem to be at a standstill, it's a good time to suggest splitting the difference. This works best when the dollar difference ends in $500, like $2,500 and $3,500. In these examples, it’s a done deal if the buyer would accept the split and move up by $1,250 or $1,750 respectively.
Usually, this can only work when you’re within a few thousand dollars of the other party. (Of course this works if you’re $10,000-$20,000 apart when you’re in markets like Orange County, California where the average price of homes is above $600,000.)
In a deadlocked situation, come back with the, “We're willing to split the difference.” Note that the first half of the statement is put forth as “We're willing to...”. The success of this approach relies on the premise that YOU are meeting them halfway (or better than halfway when you also throw in the "pool table"), in which case they may feel they "won".
Note that if the buyers counter with splitting this again, it will result in an awkward number (as well as look greedy). Usually, the party being offered the split just accepts the compromise.
The buyers preempt your counter offer:
At some point the buyers may jump the gun and offer to split the difference. If this middle ground figure is what you want, well and good. But if you feel you could get a little more, there is a twist you can put on this.
Suppose you’re at $270,000 and the buyers are at $260,000 and the buyers propose a split to $265,000. But you’d like a little more. Restate to them that they will go to the $265,000 figure. “OK, you’ll go to $265,000. Let me get right back with you.” You make it plain that they are at $265,000. You don’t even mention the word “split.”
Remember, you’re so close here (within 2%) that it’s doubtful they’d walk. Contact them and say, “We really feel we can get this together. You’re at $265,000 but we’d really like to get $267,000. Can we make $267,000 a done deal?” Put the decision back on them. Even if they split it again (to $266,000), you’re $1,000 ahead.
THE MAGIC NUMBER
Everyone has a final figure or bottom line. If necessary, be smart enough to go below yours. If it's in your range of selling at top dollar and a done deal is important, there’s a lot to be said for getting it over with. Buyers always think they paid too much and sellers think they should have gotten more.
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