Purchase ContractWhile teaching a class on purchase contract negotiations, I used an example of a home seller who rejected an offer.  The buyer's agent was upset that they didn't counter.

It was an appropriately priced home, that showed well.  The buyer sent in an offer for $100,000 less than the asking price.  There was no cover letter, no pre-approval letter and the contract looked like it was written by a 3rd grader.  No indication they were serious or would be able to close.  So the seller rejected the offer.

The buyer's agent responded immediately and demanded and explanation as to why they didn't counter.

Here is where the buyer and their agent went wrong:

  1. The price was so far from anything the seller would accept, they had no common ground.  They were not going to meet them in the middle or anything close to it.
  2. The contract was not executable.  In the rare case that the seller considered accepting the price, they could not sign the contract.  They would be forced to counter to clean up the mistakes.  The counter would require a re-write of the entire contract to clean up mistakes.  If they have to counter to clean up the contract, the price is on the table too.  This mistake weakens the buyer's hand in a negotiation.
  3. The buyer did not persuade the seller they were serious.
  4. The buyer's agent showed a lack of professionalism and convinced the other side this would be a painful at best escrow, if it ever got there.
  5. The buyer did not make the case that they could close if they got to escrow.
  6. Bottom line - The buyer did not give the seller any real basis for a negotiation.

When you make an offer on a home you need to do a few things.

  1. Present a clean, executable contract.  If they sign it, you are going to escrow.  Be sure they are not forced to counter, to clean up your contract.  If they do, everything is on the table.
  2. Demonstrate that if they accept your offer, they will be dealing with a professional and not an idiot.
  3. If you offer less than the seller wants to accept, make your offer strong and attractive in every other way.  Make them think twice before taking the risk of losing your buyer by countering.
  4. Here's the bottom line.  You need to make the case that if they take their home off the market, you will bring it to closing.

When presenting an offer, make the other side feel comfortable dealing with you.  If they feel confident you can close, they may be a little more negotiable.  Solid buyers do not grow on trees.  Flaky buyers and flaky agents do not get the same level of respect.

I just added a follow-up blog post to this one: Not All Realtors® Agree - Rejection vs. Counter Offer

 

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Randy L. Prothero, REALTOR®, Broker-in-Charge, ABR, AHWD, CRS, e-PRO, GRI, SFR

Keller Williams Realty

 

Randy Prothero is well established as an expert in working with military / VA clients and first time home buyers.  His home seller's (listing) campaign is one of the most aggressive marketing programs in the area.

Based out of Mililani, Hawaii. Randy services the island of Oahu (Honolulu County) Performs mediations and ombudsman services for the Board of Realtors.  To improve overall professionalism in his area Randy also offers classes for real estate agents. 

 

www.HawaiiRandy.com *  Oahu (Honolulu County) Property Search  *  Hawaii Military Relocations

 
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236 Comments on Did You Really Expect a Counter Offer?

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NOV
16
2010

You said it best. In a nutshell, buyer agents need to remember the basics when presenting an offer.
7:19am • #223

This rings so true with me.  It's hard to believe that in this day an age, where the Orlando MLS provides free access to online forms and the ability to fill them in online, that there are still agents using old forms, hand written and incomplete.  To add to the scenario above, having a properly written offer also makes a difference when in a multiple offer situation.  I am sure many of us here have probably picked a slightly lower offer over another simply because the buyers agent presented a better offer that was more than just price.

Thanks for sharing!
David Dorman
8:42am • #224

You're right on the money about how it works. Making a clear and convincing case is crucial to meeting of the minds.
10:09am • #225
124,221 Points

Hey Randy, Very tru and insightful post. I am working with ANYTHING and try to put some deals on the board. It is not a bowl of sugar out there but if you can check your ego at the door you still can make some deals...
10:58am • #226
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It's our policy that we do not submit offers without the pre-approval or proof of funds.  Without them I have not idea if the buyer can actually go thru with the sale.  I recently had an agent from another office in our area, make an offer on one my listings that was $60,000 less than the asking price.  The agent got very angry when my Sellers countered with their original price.  I explained to the agent that my sellers were offended by the offer and felt that they were not serious.  That if his buyers were serious about purchasing the home, they needed to make an offer that was higher and include the pre-approval letter.  I did get another offer, but was still too low to make the deal work.
11:11am • #227

What a wonderful post. I totally agree on all points! It is crucial that you have a complete contract every time.
Towanda Lahor
11:32am • #228
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So many agents do not feel it is important to get an executable contract in play.  I guess they keep the lawyers in business.

In Virginia's case, the buyers and their agent were not concerned about offending the seller, why should they offended?
12:00pm • #229
160,407 Points 1 Featured Post Attended Rain Camp

Randy,

There were so many things wrong as you pointed out.  How can the buyer's agent even conceive that his client is serious?  Great post!!!
12:06pm • #230
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Eugene - They either don't care or they are clueless.  Either way an agent who conducts themselves in that manner should really consider another line of work.
12:16pm • #231
293,204 Points 19 Featured Posts Outside Blog

Randy, I agree with you completely, in that the buyer's agent and the buyers should have done a much better job, but allow me to play devil's advocate for a moment.

I had an offer come in about a month ago on one of my listings, which was exactly as you stated above. Incomplete offer form (couldn't have been accepted even if the seller wanted to), lowball pricing, no approval letter, etc.

I advise all of my sellers before we even list that they will be expected to counteroffer every offer that comes in, even if they counter at full price. So, my seller counteroffered and I explained to the buyer's agent what was expected of her and her client to provide before we could move forward. After several back & forth counteroffers, we now have the house under contract with this buyer (fully ratified contract, with all of the shortcomings of the original offer overcome) at 98% of the original list price.

This is just one example of many such occurrences. If i had let my seller take offense to the lowball offer, and let myself be offended by the unprofessionalism of the buyer's agent, this home would likely still be sitting there in a very difficult market.

Yes, it's the buyer's agent's responsibility to make sure that their buyer is in the best position possible when making an offer, but unfortunately, many of them don't get that, and their clients often don't know any better.

I believe that it's our job as the listing agent to help our sellers remove the emotion, and do everything possible to bring a sale together, even if it means babysitting an unprofessional buyer's agent. It's more work for us, of course, but personally, I'll take the sale over digging in my heels and being right (not easy for me; i always want to be right).

I'll also add that it's absurd for any agent to think that they're owed a counteroffer or an explanation of any kind. It's not required, but as a courtesy, should be common practice.
12:49pm • #232
226,538 Points 9 Featured Posts Localism Sponsor Outside Blog Called Shot Master

I got an offer today that is $100K below the asking price. The offer was well written and included proof of funds and preapproval. It's just so far from what my clients will consider that I don't think I could PAY them to counter it!
11:57pm • #233
NOV
17
2010
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Ryan - I have had more than one experience where we rejected to have them come back with a fresh offer.  I believe to take a position that you always counter, weakens your client's hand.  Automatic counters encourage fishing.  Yes I recommend a counter in most cases, but not all cases.

I have also represented more than a couple of clients who got rejected and they still wanted the home, so we made a fresh offer.

Jenny - I agree.  The buyer and their agent knew they were low balling when they submitted it.  If they are expecting a counter, their agent must be used to dealing with those agents who recommend countering in all cases.
1:52am • #234
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I agree with Ryan, #232, in that every offer should be countered, the key is "even if it is a full price counter", clean up the offer contract with the changes you want made, and send it back.  Most often, I never get it back again, but, like Ryan, sometimes you do.  Experience does not seem to have much to do with it.  One of my more recent offers came from an agent with over 20 years in the area, and it was one of the worst contracts I have seen.  I countered on a clean contract, typed, with sellers endorsements. 
1:29pm • #235
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Garth - I'll put you down in the group that counters everything.  If the agents in your area read this, they know to send you anything no matter how bad and wait for the response.  That way they can get the sellers to show their cards first.
7:31pm • #236
NOV
18
2010
1,352,557 Points 42 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

I recently had sellers who received a great offer with a few items that would have been nice to change, but it was well written and rather than risk not having a counter signed, my clients simply signed it.

 

This wouldn't have been possible if the contract hadn't been written correctly.
2:13am • #237
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Christine - That is exactly what I teach in my contract negotiating class.  Make the offer so clean that the seller might accept a little less for fear of putting it at risk with a counter.
2:44am • #238

It truly is amazing how often common sense and professionalism are lacking in this industry.  Negotiating and positioning are the two critically important areas where agents can truly differentiate themselves and add value.  Yet there are so many agents who believe that opening the front door to a property is their big value add in a transaction, and treat the rest of the deal as a nusiance.   
8:53am • #239
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Vito - That is so true.  Those who are the true professionals will always rise to the top.
5:03pm • #240
DEC
28
2010

Great post. How about the offer that comes in on an outdated Purchase and Sale Agreement (2009) and a counter offer on a form from 2004!
10:09am • #241
DEC
31
2010
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Kelsey and Marne - I get some that are on forms much older than that.
7:39pm • #242

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Randy L. Prothero - Hawaii REALTOR® (808) 384-5645

Island Style Realty Inc. - "The Prothero Group"

Mililani, HI

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Island Style Realty Inc.

Address: 94-539 Puahi St., #B, Waipahu, HI, 96797

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