Friday, March 25, 2011

Counter Offers

Almost every real estate transaction has a counter offer included in it.  What exactly is a counter offer and how do you handle it?  Well, whether you realize it or not, you probably deal with counter offers every day of your life.  Here's an example.  I ask if you want to go to Subway for lunch, you say you would rather go to Quizno's and I say OK.  There, you just saw an offer, a counter offer, and an acceptance.  Of course, with a home there is a little more on the line that a sub!

Not all offers will require a counter offer.  Naturally, if someone offers full price on a home there probably won't be a counter offer.  If you have done your research and used comparable sales when coming up with  your offer and make a really good offer, you may not receive a counter offer.  Also, remember, it is not always about price, sometimes the terms are very important, if not more important than the actual final sales price.

Let's just assume that the price being asked for the home is fair for the market and we'll use $250,000 for the asking price.  The buyer offers $230,000 but also wants the seller to pay $6,000 in closing costs.  This offer is now actually only $224,000.  Even if the buyer offered full price but asked for closing costs, it is no longer a full priced offer and may be countered! 

The seller has 3 options at this point: 1.  Accept the offer.  2.  Reject the offer.  3.  Counter the offer.
More than likely he will counter.  Let's say he counters back with $245,000 and offers to pay the $6,000 in closing costs.  In reality, he is accepting $239,000 for his home.

The buyer now has the same 3 options the seller just had.  Also, realize that the more counter offers there are, the less chance the deal has to coming together...and, a better offer may be presented to the seller during all this negotiation. 

Ultimately, what both the seller and buyer are trying to do is come up with a price and terms that are acceptable to both of them.  Both sides may need to be flexible and realize that counter offers are just part of the transaction.

Right now we are still in a buyer's market, meaning there is a lot of inventory and not enough buyers.  Buyers have a slight advantage over sellers, but this does not mean that sellers are going to give their homes away.  On the flip side, the seller should realize that he only has one home to sell where as the buyer may have 20 homes just like it to look at.

Naturally, every offer and every transaction is different.  There are many other things to consider (time to close, buyer loan approval, inspections, etc.) which is why it is important for both the buyer and seller to consider using a REALTOR who has experience with these types of transactions and deals with them on a daily basis.  Let's face it, most people move every 7 years or so, that doesn't give them a lot of experience in dealing with all that goes into a real estate transaction.  It by no means makes them ignorant or incapable, but experience does go a long way in this arena.

If you have any questions, please feel free to contact me at 423-902-9836 or by email at David@MyChattanoogaHome.com.   For more tips, visit www.MyChattanoogaHome.com.  I am a full time REALTOR with Crye-Leike, REALTORS  in Chattanooga, TN.

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