The Offer and Counteroffer
In most real estate transactions, buyers and sellers rarely negotiate directly with each other. Instead, each party is typically represented by an agent, and negotiations take place through these intermediaries. When agents handle the process, offers and counteroffers are exchanged on behalf of their clients.
Negotiating through an agent has both advantages and disadvantages. One benefit is that you can freely express your thoughts and frustrations to your agent about the property or the seller without worrying about causing offense. For instance, you might complain that the home has been poorly maintained and say you wouldn’t even allow a pet to live in such conditions. Your agent will not pass such remarks on to the seller.
However, there is also a downside. Since the information you receive about the other party comes through the agent, it may be filtered or interpreted. If your broker is not particularly observant or transparent, you might receive a misleading impression of the seller’s position. This could result in accepting an offer that is too low or making a counteroffer that is unnecessarily high.
Real Estate Trap
When buying or selling property in India, always remember whom the real estate broker is representing. A broker working for the seller is obligated to protect the seller’s interests and cannot disclose information to a buyer if it could weaken the seller’s negotiating position.
For instance, if a seller privately tells the broker that they would be willing to accept ₹10 lakh less than the asking price, the broker cannot reveal this to the buyer unless the seller specifically authorises it.
Similarly, a broker representing a buyer cannot inform the seller about the buyer’s maximum budget unless the buyer permits that information to be shared.
Be particularly cautious when dealing with a broker who represents the other side. If a buyer casually tells a seller’s broker that they would actually be willing to pay more than the offer they have made, the broker is ethically required to pass that information on to the seller. The same principle applies in reverse when a seller is speaking with a buyer’s broker.
As a buyer, you often need to apply smart negotiating strategies not only with the seller but also when interacting with the agent. This requires being careful about how much information you reveal and keeping your intentions fairly private.
It is perfectly reasonable to ask the agent for their opinion about the property’s true market value and what kind of offer might be appropriate. Listen to their perspective and think about it carefully. You can also ask what they would do if they were in your position.
However, take a moment to step back and evaluate the advice you receive. Consider the agent’s experience, professional responsibilities, and use your own judgement and common sense. In the end, the final decision about what to offer or how to proceed must be your own.
Tip
In a real estate transaction, the only person you can rely on to be completely on your side is yourself.
The Offer Process
When a real estate transaction is handled through an agent, offers and counteroffers are ideally to be made in writing. After you decide on the terms of your offer, the agent typically prepares a written agreement or sale document. The agent then submits this offer to the other party and represents your interests while presenting and discussing the proposal.
If an offer is accepted immediately, the transaction moves forward and an agreement is reached. However, in many cases the buyer’s first offer is not accepted. Instead, the seller responds with a counteroffer. The agent then communicates the seller’s position to the buyer, may recommend accepting the counteroffer, or suggest submitting another counterproposal.
Offers and Counteroffers
- The buyer submits an offer, which the agent prepares in written form (in an ideal and professional world! The yet unprofessional resale property market in India does not offer anything in writing). This offer usually includes a specific time period within which the seller must respond.
- The agent then presents the offer to the seller as soon as possible.
- The seller can either accept the offer exactly as written or decline it. If the offer is rejected, the negotiation continues. A counteroffer is not simply a response to the original offer — it is treated as a new offer.
- If the seller rejects the buyer’s offer, they may issue a counteroffer. Typically, the counteroffer proposes a price lower than the seller’s original asking price but higher than the buyer’s offer. Like the original offer, the counteroffer usually comes with a deadline for acceptance.
Tip
Always think of an offer as a complete package. A counteroffer might keep the seller’s asking price the same but improve other conditions such as payment terms, timelines, or additional clauses. In some cases, the seller may simply insist on the original price and terms as a “take it or leave it” offer.
- The buyer can choose to either accept or decline the seller’s counteroffer. However, the buyer is not required to agree to any counteroffer made by the seller.
- If the buyer decides not to accept the seller’s counteroffer, they may respond by submitting another counteroffer of their own.
- This process of making offers and counteroffers can continue for as long as both parties wish. There is generally no fixed limit to how many times negotiations can move back and forth.
Tip
Keep in mind that your agent is negotiating on your behalf. If the agent is experienced and persistent, your chances of securing a favourable deal improve significantly. That is why choosing an agent known for strong negotiation skills is far more important than simply choosing someone who is pleasant or friendly.
Real Estate Trap
When making a counteroffer, it is often wiser to write it on the same document as the original offer. This works for psychological reasons. Even though the other party knows the original offer has been rejected, keeping the negotiation on the same document creates the impression that the deal is still progressing rather than starting from scratch. The same idea applies to countering a counteroffer. It is usually better to continue the negotiation on the same agreement rather than risk losing the deal altogether.
Why Would a Buyer Seek a Counteroffer?
Earlier we discussed deciding how much to offer when buying a property and making a serious proposal that the seller is likely to accept. In ideal situations, a deal may be completed quickly if the seller’s counteroffer involves only small adjustments.
However, there are times when a buyer may deliberately submit an offer that is clearly too low or includes terms the seller is unlikely to accept. Such an offer may appear unrealistic at first glance. The reason for doing this is often strategic — the buyer may want the seller to respond with a counteroffer.
There can be several reasons why a buyer might encourage the seller to make a counteroffer.
Reasons a Buyer May Want a Counteroffer
- The seller may have set the asking price much higher than the market value. By submitting a low initial offer, the buyer hopes that the final negotiated price will settle somewhere between the two figures.
- The buyer may simply not be able to afford the seller’s asking price. In such cases, the buyer might make an offer close to their financial limit, hoping the seller will respond with a counteroffer that moves closer to the buyer’s budget.
- Sometimes a buyer is strongly interested in the property but still wants a better deal. By making a lower offer first, the buyer hopes the seller will counter, after which the buyer can respond with an offer closer to their original preferred price, encouraging the seller to compromise.
- At times, a buyer may just want to initiate negotiations. When there are multiple offers in the market, starting the discussion helps the buyer gather more information about the seller’s expectations and determine the most realistic price to pursue.
Why Might a Seller Make a Counteroffer?
When a property is being sold through an agent, the seller usually has very limited insight into the buyer’s personality or intentions. Unlike face-to-face negotiations, the seller must rely partly on the agent’s feedback and largely on the buyer’s actions — especially the offer that is submitted. Because of this, the seller often has to interpret the buyer’s motivations based on the terms and conditions written in the offer.
For example, a friend of mine once tried to sell a house that was in very poor condition. The property was located on a steep hillside and had been built along the path of an old stream. During heavy rains, water would flow back through the area, and over time it had eroded a significant portion of the foundation beneath one side of the house. As a result, the structure was left resting precariously on what remained of its support. My friend understood that the only realistic way to sell the property was to find a buyer willing to purchase it in its existing condition and take on the responsibility of repairing it.
Real Estate Trap
Whenever a property is advertised as being sold “as is,” it usually signals that the home has certain issues. While some agents encourage sellers to use the phrase as protection against future complaints from buyers, it does not actually remove the seller’s responsibility to disclose known defects. Even when a property is sold “as is,” sellers are still expected to reveal material problems. In reality, the phrase often just alerts buyers that something may be seriously wrong with the property, which can lead them to make a significantly lower offer.
Tip
If you are selling a property, it is generally wiser not to rely on the phrase “as is.” A better approach is to openly disclose any known problems. If there is a specific issue you do not want to guarantee, you can document it clearly and have the buyer acknowledge the condition when they agree to purchase the property.
When my friend finally received an offer on the property, it was extremely low. Instead of rejecting it outright, he responded with a counteroffer that included a clause in the sale agreement clearly stating that the buyers were aware of the foundation issues and were accepting the property with that knowledge. He also revised the price upward.
The first buyers, who had submitted the low offer, backed out after seeing the counteroffer. Their strategy had likely been to pressure the seller into accepting a price close to the land value or forcing him to fix the structural problem before selling.
However, the next buyer approached the situation differently. This buyer had experience in construction and was not intimidated by the foundation problem. After reviewing the clause that disclosed the defect, he accepted it without hesitation. Negotiations then continued, and the parties eventually agreed on a price that fairly reflected the condition of the property.
In the end, the seller achieved his goal. He found a buyer who understood the issue and was willing to deal with it, while also securing a price that was reasonable given the circumstances—rather than being forced to sell the property merely for the value of the land.
The Three Types of Offers
When negotiating the purchase of a property, buyers generally tend to make one of three kinds of offers.
1. Lowball Offer
This type of offer is significantly lower than the seller’s asking price. The buyer usually makes such an offer with the expectation that the seller will respond with a counteroffer, allowing the final price to settle somewhere in the middle.
2. Close to the Asking Price
In this case, the buyer is genuinely interested in the property and is prepared to pay close to the seller’s asking price. However, the buyer still hopes the seller might reduce the price slightly, rather than rejecting the offer outright or responding with a counteroffer.
3. Compromise Offer
A compromise offer falls somewhere between a lowball bid and the asking price. The buyer expects a series of negotiations and counteroffers before both parties eventually reach a mutually acceptable price.
The Two Types of Counteroffers
When responding to a buyer’s offer, a seller typically has two practical options when making a counteroffer.
1. High Counteroffer
In this situation, the seller rejects the buyer’s offer and responds with a price that is very close to the original asking price. The idea is to keep the negotiation active while signalling that the seller is still aiming for a higher value, hoping the buyer will increase their offer.
2. Compromise Counteroffer
Here, the seller proposes a price that falls between the buyer’s offer and the seller’s original asking price. The expectation is that continued negotiations will eventually lead both sides to agree on a mutually acceptable price.
Tip
In many situations, it may not make sense for a seller to counter an offer that is already close to the asking price. Accepting such an offer can often be the wiser choice rather than risking that the buyer might walk away. However, some sellers prefer to respond with a counteroffer that repeats their original price and terms, hoping to secure a slightly better deal. While this strategy sometimes works, it can also offend the buyer and cause them to withdraw from the negotiation.
The Bottom Line
The most important principle in negotiations involving offers and counteroffers is to keep the discussion going for as long as it remains productive. Often, negotiations that initially seem unlikely to succeed can eventually lead to a workable agreement once the other party reconsiders their position and returns with more reasonable terms.
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