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6 tips to successfully negotiate a counteroffer in today’s real estate market

By Shelley Sines

January 2022

Here’s how buying a house works in a perfect world: You find your dream home, you make a reasonable offer you know you can afford, and the seller immediately accepts it without batting an eye. Here’s how it works in the real world: You do all the above, and the seller responds with The Dreaded Counteroffer. Lucky for you, a counteroffer is not so much something to dread as it is an opportunity you can leverage to negotiate an even more favorable home purchase agreement. 

But what is a counteroffer, you ask? 

A seller might not like a buyer’s initial bid, so they’ll use a counteroffer to accept some terms of the offer while changing other aspects of it. Counteroffers often involve modifying the home’s sale price, but they can also be used to negotiate closing costs, repairs, contingencies (like the closing date) and even personal property acquisition (like appliances that come with the house). A buyer can either accept the seller’s counteroffer, or counter with their own counteroffer (and on, and on, and on). Ultimately, either the buyer or seller can accept, reject or counter any offers they receive.

Rather than something to fear, counteroffers should be expected when you’re shopping for a home, even in a market very favorable to buyers. Read these tips to learn how counteroffers work – and how you can navigate the counteroffer process like a seasoned pro, even if you’ve never bought a home before.

Tip #1: Get pre-approved 

A pre-approval letter from a reputable lender makes your offer more attractive and throws some real weight behind it. The seller knows you’re “good” for the funds to purchase the home – they may take you more seriously and be more willing to compromise on the details of the final contract, knowing you’ve already been vetted by a lender.

Tip #2: Make your initial offer competitive, but don’t put all your chips on the table

In other words: Don’t lowball, but do make an offer that makes sense given the market. (A “lowball” offer in real estate is generally one that comes in at 15% or more below market value.) Not only will a seller likely consider a lowball offer a waste of their time, but you also take the risk of insulting them. And the last thing you want to do is offend the seller.

So, do some research! Learn the fair market value of the home you’re looking to purchase, and find out what other homes in the area are currently selling for (one way to do this is to pay for a professional home inspection). This will help you determine how high or low to go with your initial offer to purchase. Remember, if you start at the very top of the home’s market value (or the top of your budget, for that matter), you won’t have much room to negotiate later. 

If it’s a buyer’s market, there are a lot of homes for sale – a glut of inventory – and that means the buyer has the upper hand when it comes to counteroffer negotiations. But if it’s a seller’s market, there’s more demand than supply, so the seller will typically receive multiple attractive offers on their property and thus has less incentive to meet a buyer’s demands or give in to any counteroffer negotiations they find unfavorable.

Tip #3: Know what you can afford before you make your initial offer

If you’ve already followed our first tip to get pre-approved before making an offer on a home, you’ve probably already done enough budgeting to know what you can afford for a monthly mortgage payment (including mortgage insurance, taxes and property insurance). But don’t forget about the extras, like closing costs or earnest money, because those are items you can leverage as you negotiate counteroffers. And don’t be too rigid on your bottom line – even if you end up agreeing to a purchase price that is $5,000 or $10,000 more than the top of your ideal budget, that may only affect your monthly payment by $20 to $30. It’s important to keep all your options in mind, as you may be able to afford the home you want at a higher price point by putting less money down up front (assuming you can afford the monthly payment).

Tip #4: Use the home inspection as leverage

Any major issues that crop up during a home inspection could be a valid reason to counteroffer. Call an expert to get an estimate on what the repairs will cost, and structure your counteroffer letter accordingly. (Unless, of course, the repairs are insurmountable – you need to know when you’re willing to walk away!) The counteroffer should specify what the repairs are and include professional estimates of how much they would cost to fix, as well as a copy of the home inspection report. The counteroffer can request the seller make the repairs themselves, or ask for a credit to the buyer’s closing costs (that way, the buyer can save on closing costs as well as ensure the repair is done to their satisfaction). The seller can decide if they want to accept the post-inspection counteroffer or not.

Tip #5: Understand that everything can be negotiated

Appliances and personal property, the loan closing date: Counteroffers can be used to negotiate much more than just the purchase price of the home. You never know – maybe the seller will knock a couple grand off closing costs if you give them more time to move out! When we bought our home, we used a counteroffer to negotiate one seller repair to the radon mitigation system, and added some personal property stipulations to our contract (we wanted to keep some of the lighting fixtures, window treatments, and appliances).

Tip #6: Move quickly, and use an agent you trust

A good agent can help you accept, reject, or make your own counteroffer (as well as help you evaluate whether a counteroffer is worthy or not). All counteroffers have an expiration date, so be cognizant of that and make a timely decision. Also, know that the seller can accept another offer while you’re deciding whether to move forward with their bid – they absolutely have the right to withdraw an unanswered counteroffer if they get another offer they like more in the meantime.

Counteroffers are a normal part of the real estate process, and you can put them to work for you while you’re shopping for a home. Be sure you brush up on the basics of counteroffer negotiations before you make your initial bid, because they can make or break a deal.

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Shelley Sines has been writing for MGIC since she graduated from college in 2007. Currently raising a sweet little family with her husband in the suburbs of Milwaukee. Happiest when cooking or gardening. Competitive Scrabble player. Enthusiastic about road trips, wine, good TV.
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