How To Counter Your Homebuyer’s Offers By Example

In my previous blog, I wrote about How To Review And Respond To Homebuyers' Offers.
In this blog, I am going to give some ideas on how to counter your buyer’s offers by example.

First of all,  you need to know what to counter. When a homebuyer makes an offer, the buyer or the buyer agent usually send you a Purchase and Sales Agreement signed by the homebuyer, or sometimes a letter of intention.

Letter of intention (LOI) is an informal offer used by most investors to save time.

A Purchase and Sales Agreement is a formal offer used by most homebuyers. Purchase and Sales Agreement singed by the buyer is not a contract yet. You can either reject it by not taking any action before the offer’s expiration time or by simply writing a word or few words on the agreement indicating the offer is rejected.
You can also counter back to initiate the negotiation process. Your counter offer is called seller to buyer counter offer. And buyer can also counter back to your counter offer, which is called buyer to seller counter offer. There can be multiple counter offers. This process is actually a negotiation process.

What items you can counter offer? Followings are some important items in the Purchase and Sales Agreement, which are usually the focus of the counter offers.

· Sales price
· Earnest money deposit
· Closing cost
· Closing date
· Financing term
· Fixture requested by the buyer
· Personal property requested by the buyer
· Contingency on timeframes and repair
· Any other contingencies that favors the buyer
· The time the offer or counter offer expires

Following are the examples of the counter offers:

Here is a real example of multiple counter offers on a property listed at $315,000.  A homebuyer submitted an offer in the form of a Purchase and Sales Agreement dated on July 2, 2005, 9:00AM. The offer’s expiration date and time was July 3, 2005, 9:00 pm which can be summarized as below:

1. Sales price  - $300,000
2. Earnest money deposit  - $2,000 in selling broker’s escrow account
3. Closing cost – buyer asks seller to contribute up to $5,000
4. Closing date -  Sept. 5, 2005
5. Financing – 5% down, 6.5% 30 years fixed rate mortgage from institutional lender. Buyer starts loan application 7 days after the binding of the agreement.
6. Seven days after binding to do inspections, 3 days to negotiate on repairs
7. Contingency on homebuyer success to sell buyer’s current home
8. Sofa stays with the property
 
A. Counter Offer #1 from Seller to Buyer

 It was signed by seller and sent to buyer agent by FAX. With following key points.

1. Sales price to $309,000.
2. Earnest money deposit  - $3,000  in listing broker’s escrow account
3. Closing cost – buyer asks seller to contribute up to $3,000
4. Closing date -  July. 30, 2005
5. 5% down, 6.5% 30 years fixed rate mortgage from institutional lender - accepted
6. Seven days after binding to do inspections, 3 days to negotiate on repairs - accepted
7. Contingency on homebuyer success to sell buyer’s current home - rejected
8. Sofa stays with the property –rejected
9. Expiration date and time: July 4, 2005, 9:00 pm

This was done by writing the counter offer on the standard counter offer form.

B. Counter Offer #2 from Buyer to Seller Signed by The Buyer
It was signed by buyer and sent to seller agent by FAX. With following key points.
1. Sales price to $307,000.
2. Earnest money deposit  - $3,000  in listing broker’s escrow account
3. Closing cost – buyer asks seller to contribute up to $3,000 - accepted
4. Closing date -  Sept. 5, 2005
5. 9. Expiration date and time: July 5, 2005, 9:00 pm

The seller singed the counter offer #2 and accepted the counter offer and the Purchase and Sales on July 5, 2005, 6:00 pm. The counter offer was sent back to buyer through buyer agent July 5, 2005, 6:15pm. Buyer agent acknowledged that the counter offer was received and also was given to buyer. The Purchase and Sales Agreement was binding. At that moment, the buyer and seller had a binding contract.

The earnest money check was sent to listing broker on July 6, 2005. and deposited in escrow account July 7, 2005.

This was a relative easy deal because seller was a motivated seller and buyer wanted to buyer this house very much. Otherwise, it would be a very difficult negotiation process. It could have been be no binding contract at all.

However, this deal was falling apart because the buyer did not sell current residential home and was unable to get a mortgage. Earnest money had to return buyer because buyer’s inability to get the mortgage loan.

The listing agent made a mistake by not warning the seller that buyer might not be able to get a loan because of buyer primary home was still on the market. The agent should have advised the seller to ask for a pre-approved letter from a lender and also move the closing date to July 30 even though the buyer was able to get a loan. Anything can happen if you set up a closing time longer than 50 days.

Related home selling blog:

How To Review And Respond To Homebuyers' Offers

Top 3 Reasons Why Home Sales Fall Apart and How To Stop It From Happening
 

Share This