Dealing With Counter-Offers
You're a serious buyer in the middle of negotiating the second round of counter-offers with the seller.
All at once, it happens -- the seller has accepted another offer from a brand new buyer!
Your first question might be, is this even legal? After all, your counter-offer gave the owner twenty-four hours to accept the proposal that's currently on the table.
It's probable that your second question would want to determine what you could have done differently, especially as a serious buyer.
First let's review the bargaining issues involved.
The seller was under no obligation to accept your counter-offer and was free to accept another offer from the new buyer who entered the picture.
Because a counter-offer is regarded as a brand new offer that the seller does not have to accept. Even though you and the seller might have agreed to some or even most of the terms of the purchase/sale, any change in the offer -- such as a counter-offer -- makes it void. In other words, all previous bets are off and the parties are back to square one in the negotiations. In your case during this mid-stream process, the seller chose an offer from another buyer.
You may not ever know why the seller accepted the other offer. It could be that the buyer came in with a higher price, better terms, and/or fewer contingencies. The buyer might have flashed more earnest money in front of the seller to entice him. Or perhaps the seller got tired of the tedium and stress of counter-offers with you and wanted to bring the volley to a halt.
The lesson for you is to determine your priorities before you find a new property. The following can help you decide:
Begin with the end in mind.
In other words, know which issues are most important for you to win as well as which are you're willing to give up? It's best if you prioritize the three most important wins you ideally seek in the purchase.
For example, fair price, minimizing closing costs and quick closing may top your list. If you can win only one, it will be price. If you can reach for two, you'll ideally pay fewer closing costs. Also know the degree to which you'd minimize or even sacrifice all three in order to obtain the house you want. Knowing this, you're less likely to find yourself in needless counter-offers that could have disastrous results.
Communicate your position.
Make sure you fully communicate the desired outcome to any real estate professional that's representing you. For example, if a buyer's agent is negotiating on your behalf, outline to the agent just how much you want this house and what you're willing to do to get it. As a trained professional, he/she will then evaluate the best approach to take in price, terms and negotiating tactics to help you realize your goal of obtaining the property.
Show your interest.
Be honest with the seller about your interest in purchasing the property. This doesn't mean that you'll reveal all of your purchase strategies or back away from negotiating a fair price. It just means that you'll express the appropriate amount of interest, involvement and motivation to signal to the seller that you're a serious purchaser. Sellers often "choose" one buyer's offer over another based on the level of personal interest and commitment the buyer appears to have to the seller's home.
If a buyer's agent represents you, it's good to reduce to writing exactly what the agent can share with the seller about your level of interest in the property. That way there's less chance that inappropriate, harmful information could be leaked to the seller to potentially erode your negotiating power.
While counter-offers are designed to let the other party know you're still in the negotiating game, using them haphazardly without a definite game plan can drive you away from -- not closer to -- a home purchase.