What is a counteroffer in real estate? What to know for better deals

In a perfect world, homebuyers could make a first offer that sellers are ready to accept without conditions. But in reality, buying or selling a home usually involves a lot of negotiation.

After the initial purchase offer, buyers might receive a counteroffer, which allows both parties to modify terms until they reach an agreement. 

Whether you're a first-time buyer trying to secure a great deal or a seller looking to maximize your return, knowing what a counteroffer is in real estate and how counteroffers work can give you the confidence to navigate these critical conversations.

What does counteroffer mean?

In real estate transactions, a counteroffer is a rejection of the original offer combined with a new proposal with adjusted terms. When sellers receive an offer they don't find acceptable, they can respond with a counteroffer that modifies the price, closing date, contingencies, or other details.

When someone presents a counteroffer, the original offer becomes void. But both parties can continue the real estate counteroffer process until they reach an agreement or decide to walk away. Each counteroffer gives buyers and sellers another opportunity to move closer to terms that satisfy their needs and priorities and find a middle ground.

What do people often negotiate in real estate deals?

When countering an offer on a house, you might be looking to change contract terms beyond just the selling price. These are some key elements that typically come up for discussion:

— Purchase price: This is the most common negotiation point, where buyers might start below the asking price while sellers counter with higher amounts.

— Closing costs: Who pays for what closing fees, including title insurance, attorney fees, and transfer taxes, might be part of negotiations.

— Closing date: Timeline flexibility can be valuable, especially when buyers need extra time for financing or sellers want to coordinate their move.

— Home inspection contingencies: Having an inspection timeframe and outline of how to handle repairs or credits can impact a deal.

— Financing contingencies: Some offers include a deadline for mortgage approval and outline what happens if financing falls through.

— Personal property inclusions: Which appliances, fixtures, or furnishings stay with the house could be countered. 

— Earnest money deposit: Along with a down payment, the amount of good faith money the buyer puts down to show they're serious about the purchase.

In competitive markets, buyers might offer to cover appraisal gaps, offer a sum above the asking price, or waive certain contingencies to make their offers more attractive. Sellers might agree to leave behind expensive appliances or provide home warranties to sweeten a deal without reducing their asking price.

Tips for buyers when counteroffering in real estate

Understanding how to counter an offer on a house effectively can help you secure better terms without alienating the seller. Here are some things to consider:

— Make a stronger offer without offering more cash: Strengthen your position through a larger earnest money deposit, minimal contingencies, or by getting pre-approved for your mortgage. Better's One Day Mortgage gets you a commitment letter in 24 hours, showing sellers you're a serious buyer with conditionally approved financing and are ready to close quickly.

— Know your limits: Set a maximum budget and stick to it. Consider not just the purchase price but also closing costs, moving expenses, and potential repairs.

— Review terms carefully: When counteroffering, don't focus solely on the asking price. Sometimes, sellers will accept a lower offer with fewer contingencies or a faster closing timeline.

— Work with your real estate agent: Your agent understands local market conditions and can advise you on what constitutes a reasonable counteroffer based on comparable sales and current demand.

See what you're pre-approved for

...in as little as 3 minutes – no credit impact

Tips for sellers when counteroffering in real estate

When you receive an offer that needs some adjustment, these strategies can help you navigate the counteroffer process:

— Review the entire offer thoroughly: Look beyond the proposed purchase price to evaluate the buyer's financing strength, requested contingencies, and potential timeline.

— Be willing to outright reject lowball offers: You're not obligated to counter if an offer is far below your expectations. Sometimes, it's better to wait for a more serious buyer.

— Counter strategically: When you counter, make changes that address your priorities while keeping the deal attractive to the buyer.

— Consider the market conditions: In a seller's market, you have more leverage to hold firm on price, while you should be more flexible on terms in a buyer's market.

What’s the role of a real estate agent in a counteroffer?

Real estate agents serve as intermediaries, facilitating communication between buyers and sellers during the counteroffer process. The agent handles the formal presentation of counteroffers and manages the timeline to keep negotiations moving forward smoothly. 

Your agent should help you understand the implications of different terms, suggest reasonable counterproposals based on market knowledge, and ensure all paperwork gets completed correctly.

Experienced agents also provide insight into the other party's motivations and constraints. They can often read between the lines of an offer to understand what matters most to the buyer or seller, helping craft counteroffers that address those priorities while protecting your interests. 

Counter-offering pros and cons

For buyers

For sellers

Example of a counteroffer

Here's a practical real estate counteroffer example to illustrate how the process works.

Imagine that a buyer offers $450,000 for a home listed at $475,000, with a 30-day closing period and a request for the seller to pay $5,000 in closing costs. The seller reviews this offer and decides the price is too low, but likes the quick closing timeline. They responded with a counteroffer at $465,000, agreed to pay $2,500 in closing costs, but want to close in 45 days to coordinate their move.

The buyer now has three options: accept this counteroffer, reject it entirely, or submit another counteroffer. They might come back at $460,000, agree to the 45-day closing, and ask the seller to split the difference on closing costs at $3,750. This deal finds a happy medium between the first two offers, and both parties end up agreeing to these terms. 

Smart negotiation often involves give-and-take on multiple items rather than focusing solely on the purchase price. In the example above, both parties found ways to compromise while protecting their most important priorities, demonstrating how effective communication through real estate agents can lead to successful outcomes for everyone involved.

Get expert help with your next counteroffer

Counter-offering is a regular part of most real estate transactions, giving both buyers and sellers the chance to find a middle ground. What constitutes a reasonable counteroffer on a house depends on local market conditions, comparable home sales, how long the property has been listed, and your specific financial situation. 

The key to successful negotiations lies in understanding market conditions and your priorities and working with professionals who can guide you through the process.

Whether buying your first home or selling a property you've owned for years, Better can connect you with knowledgeable real estate agents who understand local markets and negotiation strategies. Our mortgage experts can also help you get pre-approved quickly, strengthening your position as a buyer and showing sellers you're ready to close on favorable terms.

The best part? If you work with a Better partner real estate agent and get a home loan with Better, you’re eligible to get $2,000 off your closing costs.

...in as little as 3 minutes – no credit impact