Home Seller Guide: Seller’s Guide to Negotiations when Selling a House
You had worked hard to get your house ready for the market, decluttering and even painted the whole house. You’ve hired a Realtor®, gotten a professional pictures, set a reasonable listing price for your home and put your house on the MLS. Several buyers have attended showings, and one or two have been highly complimentary about your home. Sooner or later, you are going to get a buyer that’s interested enough to make an offer.
Now what? It’s time to get down to business and try to work out a win-win agreement between you and the buyers.
In most cases, an offer is actually just the beginning of a successful transaction. Negotiations and counter offers are common aspect of the home buying and selling process. With a little give and take, you can hopefully reach a deal you’re happy with.
The Offer
A buyer makes an offer with their agent’s help by filling out a standard document called a Residential Resale Real Estate Purchase Contract. This pre-printed “contract” is not legally binding until both parties agree to all the terms and sign the contract. Until both parties sign, the document is simply an offer.
Understanding the offer is important and critical. Always keep in mind that price is not always the most important part of the offer. Depending upon your circumstances and situation, a closing date could be more of an issue than price for example. Always consider the offer in its entirety, not just based on how much you’ll net at closing.
Here are some of the terms of an offer that you’ll need to consider:
– the sales price
– what type of loan are they planning to use
– the amount down payment
– the amount of earnest money the buyers are putting down as good faith
– who pays closing costs
– are they paying cash, or is there a financing contingency
– contingencies
– the closing date
As you can see from the list above, evaluating an offer properly isn’t always a simple process. Figuring out how much money you’ll net at the closing table is not only part of what you need to consider. You need to understand what is customary in your market, and most importantly know how each of these variables can possibly affect the transaction.
If you like the offer, you can accept it by signing the offer. At this point, the offer turns into a binding purchase agreement. Neither you nor the buyer can back out of the deal unless the contract allows you to do so.
Often the original offer from the buyer is not acceptable. Either there are more contingencies than you’d like, the closing date won’t work, the sales price is too low or the concessions are too high. You now have two choices: reject the offer outright or make a counter offer.
Understanding the counteroffer
Like an offer, the counter offer is made on a pre-printed document named “Counter Offer” form provided by your agent.
The counteroffer is your opportunity to change any of the terms asked for by the buyer with your own terms. Some examples of changes are:
– increase the purchase price
– request a higher earnest money
– decrease the length of time which the buyer has to satisfy their contingencies
– change the closing date
You need to complete this document together with original offer in section 9c with line 419, 420 checked and get it back to the other party prior to the expiration of the original offer. If your agent did no present the counter offer prior to the expiration date, the counter offer has no effect and you’ll need to start all over again with a fresh offer from the buyer.
Legally when you counter an offer you have rejected the original offer. The buyer is now under absolutely no obligation to you, as the ball is now in their hand and to do with as they please. Always be sure that, before countering any offer that you are willing to take the risk to lose the deal, because it can happen.
Counter offer contains a new expiration date. Quite often the expiration date gives the other party 24 hours to respond. This can be more or less depending on the circumstances.
If the buyer does not respond by the expiration date, the counter offer expires. Negotiations can only be started again by the buyer submitting a fresh offer.
What happen next?
When the buyer receives a counter offer, the buyer has three choices (same as you – Seller had when you received the offer):
Accept: The buyer does this by signing the counter offer before expiration and deliver the signed offer to your agent.
Reject: The buyer can reject your counter offer. At this point, the deal is dead and can only be revived with a new offer.
Counter the counter offer: This process will keep going until both buyer and seller agree with all the terms. Most well-advised buyers and sellers reach agreement after one or two counter offers.
When you should counter offer, and when you should not?
Discuss to your agent. If you hired a great one, the agent let you know how good the offer is. Do not attempt counter if you are not willing to risk losing the buyer.
Many factors must be carefully considered. Obviously you have a price expectation, and your real estate agent will do the best to meet that expectation. If the offer is clearly unreasonable, your real estate agent will advise you to submit a counter offer.
However, if you are selling your home in a buyer’s market, the buyer may have his pick of suitable homes in your area. Making a counter offer — even one that seems reasonable — may drive the buyer towards the second home on his list, and you may end up with no deal.
On the other hand, in a seller’s market with a shortage of homes for sale, the buyer may be prepared to hang in through two or three rounds of counter offers to secure their dream home. In this scenario, you can probably afford to push for your perfect deal.
The best advice is, listen to your agent and think carefully and diligently and put emotion a side. If you can live with most of the terms in the offer, you should probably consider taking it. Having a willing and able buyer under contract is worth more than having your home sitting on the market waiting for the perfect offer to come along and losing money day after day.
Thinking of selling your house? Let’s start a conversation even if it’s early. If it isn’t the right time for you to sell, we’ll let you know. We’ll also advise you to get your home on the market if the conditions are right and your home is able to sell for enough money to meet your expectation. Give us an opportunity to help you self-discover your needs.
Feel free to use our 15 second Home Value Estimator and take a look at what your home may sell for today.
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