A Guide to How Counter Offers Work in Real Estate

By LeeMarie Kennedy · August 30, 2023 · 9 minute read

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A Guide to How Counter Offers Work in Real Estate

Most people aren’t prepared for the wild and sometimes-bumpy ride of negotiating counter offers in real estate, even though the experience is remarkably common.

Home sellers are free to make a counter offer if they’re dissatisfied with a buyer’s initial bid. Usually, that counter offer indicates they’ve accepted the buyer’s offer subject to certain changes, including updates to contingencies, closing date, and sales price.

Counter offers are a fairly standard part of the home-buying process, but the rules of engagement might not seem remotely intuitive at the time. To help understand how counter offers in real estate work, what the typical negotiating steps look like, and how to counter offer on real estate, here’s a little guide you can cram with.

Common Reasons for Counter Offers

From the beginning of the home-buying process, unexpected twists and turns can arise. After sifting through hundreds of listings, attending several showings, and putting an offer in on a dream home (or two, or three), the deal can be far from done.

There are many reasons why it takes time to buy a house, and counter offers can certainly be one of them. Counter offers in real estate can come into play in these scenarios:

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A Change in Sales Price

One of the most commonly contested items in the purchase of a house is the sales price. If buyers come in lower than the asking price with their offer, sellers might counter with the original asking price (if they’re unwilling to negotiate) or somewhere between the asking price and the offer.

Recommended: What to Know About Getting Preapproved for a Home Loan

Requesting a Later Closing Date

Sometimes sellers simply need more time to vacate the premises. Whether they have unfinished business or unexpected plans, they may present a counter offer that extends the escrow period to allow them more time to move out.

Increasing the Earnest Money Deposit

In some cases, the seller could up the ante by increasing the earnest, or “good faith,” money deposit the buyer submits with the offer. Earnest money deposits are typically between 1% and 3% of the purchase price, but in a hot market, there’s a chance the seller could ask for more to ensure the buyer is serious about purchasing the property.


💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

The Removal of Certain Contingencies

Contingency clauses are actions or conditions that must be met before a real estate contract becomes binding. If you’re a first-time homebuyer (or even if you aren’t) it’s wise to brush up on these terms. Common contingencies, which most sellers will see as standard in a real estate offer, are:

•   An appraisal contingency to protect buyers if the property is valued lower than the amount they offer.

•   A financing contingency that allows buyers adequate time to get a mortgage or other financing to purchase the property.

•   An inspection contingency that ensures buyers have the right to a thorough inspection of the property within a specified period of time.

Some contingencies, however, are considered less than standard. For example, a home sale contingency grants buyers a set amount of time to sell their existing home so they can finance the new property. Some sellers may find this contingency burdensome, particularly in a hot market, so they could make a counter offer that removes the home sale contingency. They can also counter with a “kick-out clause” that gives a real estate agent the right to keep showing the house while buyers attempt to sell their existing home.

Requesting Repairs

If a home inspection reveals necessary repairs or renovations to the property, the buyer could submit a counter offer to negotiate a lower price or ask the seller to complete the repairs before closing.

Deciding Who Covers Closing Costs

In a buyer’s market, it might be possible to negotiate the house price or some or all of the closing costs to be paid by the seller. These costs include appraisal fees, settlement fees, title policies, recording fees, land surveys, and transfer tax. Many buyers are surprised by how expensive closing costs are, but in particularly hot markets with multiple offers, sellers can counter with a simple “no” to indicate they won’t be covering those costs for the buyer.

How Do Counter Offers Work in Real Estate

While real estate counter offers vary depending on the market, the seller’s unique circumstances, and other standalone factors, there are some fairly standard parameters to the counter offer process:

What’s a ‘Normal’ Number of Counter Offers?

There’s no legal limit to the number of counter offers in real estate transactions. Initial offers, counter offers, and subsequent counter offers could ping pong back and forth for weeks or more.

Knowing the local real estate market trends can be key here. In a buyer’s market with plenty of houses for sale, sellers might want to be cautious about submitting an unnecessary number of counter offers.

Similarly, in a seller’s market where inventory is low and buyer competition is high, buyers might want to limit the number of counter offers they push back at the seller.

Can a Seller Make Simultaneous Counter Offers?

Depending on the state where the real estate transaction takes place, a seller may or may not be able to make counter offers to more than one buyer. That said, most real estate agents advise against multiple simultaneous counter offers, as it could end up in two legally binding contracts for the seller.

How Long Does the Process Take?

Number of counter offers aside, homebuyers can expect a closing to take about 45 days, on average. But how long it takes still varies from buyer to buyer, with factors like whether they’re paying cash, how long it takes them to find an inspector, and if the house appraises at a lower value, affecting the overall timeline.


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How to Counter Offer in Real Estate

To some degree there’s such a thing as real estate counter offer etiquette. Here are a few things to consider when engaging in the counter offer process:

Have a Comprehensive Picture of Costs

For buyers, having an accurate handle on what it will cost to buy the house is essential for negotiating counter offers discerningly.

Closing costs can be one of the most negotiated items between buyers and sellers and add up to as much as 5% of the mortgage amount. Having a firm grasp of how much to expect in closing costs can help guide the counter offer process.

Setting realistic expectations for the monthly housing payment (including the mortgage principal and interest, insurance, maintenance, any homeowners association fees, and other costs) and what they can afford to pay as a lump sum at closing can help shape this picture for the buyer.

A mortgage calculator helps buyers break down the cost of purchasing a home. Understanding the various factors that might affect your home loan costs is important, too.

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Go In With a Strong Offer

A “strong” offer is backed by data that defines what’s happening in the market, and research (with the help of an agent) around what’s considered “fair market value.” Being preapproved for a home loan will make you an attractive candidate from the seller’s point of view.

Coming in at 15% or more under the fair market value is generally considered a “lowball” offer and can start buyers off on the wrong foot. In some cases, sellers might skip right over anything that isn’t considered a strong offer.

Know What Can Be Negotiated

One of the first steps in making a real estate counter offer is knowing what can be negotiated:

•   Possession date. Giving the sellers more time to move out could mean an exchange for a condition the buyer desires. Buyers hoping to move in sooner might make a counter offer requesting an earlier possession date.

•   Personal property. Some of the seller’s personal property like furniture, window treatments, artwork, or gardening tools could be negotiated into the contract in a counter offer.

•   Home warranty. Older houses can come with their own unique sets of systems and appliances, so buyers might make a counter offer asking the sellers to cover the cost of a one- to two-year home warranty ($350 to $600 annually, on average) if unexpected repairs need to be made after move-in.

•   Earnest money deposit. Whether buyers are trying to reduce their risk of something going wrong during closing or strengthen their offer, they can negotiate a lower or higher earnest money deposit with a counter offer.

Be Timely and Responsive

Real estate offers and counter offers often come with a set expiration date, so time is usually of the essence. Forty-eight hours is a standard acceptance window in many real estate markets, but in hot markets offers might expire within 24 hours or less.

Some sellers take this concept to a whole new level, setting stringent requirements around offer acceptance. It’s up to buyers to determine whether or not they’re willing to reply quickly enough to meet the sellers’ time demands or risk losing the deal.

Try Not to Take Things Personally

It might not feel like “all’s fair in buying and selling a home” since it’s one of the biggest financial transactions many will make in their lifetime. But buyers and sellers shouldn’t be surprised if it comes with a little bit of literal give and take.

And while it might seem like a personal affront to have a real estate offer rejected, it’s possible (and even likely) that the seller has multiple offers or was simply able to strike a better deal.

When push comes to shove and purchase comes to close, buying a house is a matter of business, no matter how personal the home-buying journey can feel.

The Takeaway

Real estate offers and counter offers are a common form of business negotiation, and a first step in making a counter offer is knowing what can be negotiated. Being cognizant of counter offer etiquette can be helpful.

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FAQ

How do you handle counter offers in real estate?

Counter offers are an expected part of the negotiation process so approach any counter offer calmly. Know your goal for the overall cost of your home purchase or sale, and what levers you can pull to get there (lower/higher price? Change in contingencies or closing timeline?). Come back with your strongest counter offer but always be prepared to walk away.

What are the steps in a counter offer?

Understand the complete picture of costs in the transaction. Go in with your strongest counter offer, in a timely fashion, and don’t take it personally if you don’t get 100 percent of what you want from the deal.

What is the general rule of counter offers?

The number one rule of counter offers, whether you’re buying or selling, is to know what total price you can ultimately afford. Keep calm and negotiate on, but don’t get emotionally involved — you may need to walk away at any time.


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