Counter offersSilicon Valley home buyers sit on pins & needles once they have written their contract to purchase property.  They wait and wonder and may have trouble sleeping while they expect a response. This is normal, of course. It’s hard to wait.

What happens after the Silicon Valley real estate contract is signed?

Sometimes, offers are presented in person by your buyer’s agent directly to the listing agent and sellers and there may be a nearly immediate response, or at least something soon after – within a few hours.  More often, though, now offers are presented by email to the listing agent, who in turn gets it to the seller either at a personal meeting or also by email.  Most of the time there is a counter offer, but sometimes there was enough communication ahead of time between the agents that in fact an offer is written in an acceptable fashion and is simply accepted by the sellers without any counter (or there were multiple offers and one was good enough to accept without a counter).

Some real estate trainers insist that every offer should get a counter offer – sellers should never simply accept the contract presented by the buyers

Some real estate trainers (who are teaching Silicon Valley real estate agents what to do) insist that every offer should always be countered so that buyers do not later worry that they overpaid. “Make them work for it” so they don’t have buyer’s remorse is the theory.  The bigger the fear of “buyer’s remorse”, the more likely that the agent will further negotiate the offer – at least a little.
A few real estate trainers, luckily not many (but one in particular who’s popular in the San Francisco Bay Area), insist that every offer should result in not just one counter, but instead a prolonged series of counter offers.  The theory is that this is how we agents should “show our value”.  There will be not one or two but many counters going back and forth, preferably over several days, according to this philosophy. Personally, I can’t stand this type of thing because more than really fighting for the client’s dollar, it’s a show to impress clients of how hard agents are fighting for their dollar. It’s an exercise. More than a few times I have see this behavior serve to alienate buyers.  They end up feeling like they put their best foot forward, working in good faith to simply buy a home, but it wasn’t good enough.  They get countered something crazy (often these counters also contain too many changes) and respond with something fair, only to get yet another counter. At this point, they are miffed or even angry.  Do you really want to alienate someone who’s trying to purchase your house or condo? I don’t think so. It’s unnecessary and it’s counter productive. I submit that it’s never wise to make buyers and sellers detest each other, but that’s exactly what can happen if you get more than a couple of counter offers.  It might be a game to the agent(s), but for the clients, for whom buying and selling is very emotional, it creates prolonged anxiety and smacks of game-playing.  So beware: agents may or may not reveal that this series of counters is part of their strategy, but you should know that it could happen to you.

What can you do if you think the other side is out for a long battle of negotiating?

The answer really depends on how much you want to buy or sell the property in question, and whether or not there’s any competition.  For buyers and sellers, tell your agent you do not want to play games, you want to be expedient about this.  You can set your terms and draw a line in the sand – that may or may not be the best thing to do but it is always a possibility. Straight talk, agent to agent, about the damage being done to the relationship can help to curtail it.  A phrase I have used in this situation is this: “I am having to do damage control with my clients because of these prolonged negotiations”.  That’s a polite way of saying that my clients are getting mad and the nickle and diming is about to backfire. Get serious or we’re done talking.

What can you do to avoid getting a counter offer and to ensure that your offer is accepted right away?

Perhaps this is a multiple offer situation, or you’re concerned that if you get a counter offer, it will allow another buyer to step in with a higher purchase agreement and get the home. Or maybe you have some sort of time deadline (such as a 1031 exchange time frame or some other personal reason) and you want to just get your offer accepted. How can you increase the odds that it will be? First, do your homework and know the market values.  If you want the property, offer fair market value. If you don’t, they’re most likely going to counter you back up to what they think is fair market value (or they won’t counter you at all – they will simply reject your offer if they find it insultingly low). Buyers don’t want to over pay and sellers don’t want to sell for too little, but if you worry about “getting a good deal” you may end up not getting the house or condo at all. Second, have your buyer’s agent speak with the listing agent prior to drafting the contract.  This is a good policy for many reasons, but a very practical one is to find out what the seller wants or needs.  Sometimes that info is in the MLS printout but just as often it isn’t.  Does the seller need a longer escrow? A shorter one? A rentback? Is any fixture excluded?  Is a pre-sale escrow opened, and if so, with which title company?  There are lots of questions to ask, including the very open ended one of “is there anything I should know when writing this offer?”  In our San Jose, Los Gatos, Silicon Valley area there are 2 sets of real estate forms in use – the CAR and the PRDS.  Some listing agents insist on one or the other. (If not, talk with your Realtor about the pro’s and con’s of each.)

Sometimes, a counter offer is unavoidable: distressed sales almost require them

If your contract is for an REO or bank owned property, you will get a counter offer and lots of addenda.  Just expect it.  Read it all carefully and consider having a lawyer review it too. With a short sale, the odds are that you will get a counter offer as well. Sometimes it’s a matter of precise pricing – if there’s a pre-approval for a particular sale amount, you will be countered to that.  (In 2009 I got one like that which surprised me as the price was lower than what we had offered.) With distressed properties for sale, it’s very difficult to avoid being countered.  Not so with a “regular sale”, though, if the Realtors or agents communicate ahead of time, the buyers make a fair offer and the sellers are reasonable. Finally, just remember that if your offer is accepted without a counter, it’s a win, not a signal that you overpaid! Want to increase the odds of buying or selling without game-playing? Talk to your agent ahead of time, prior to the drafting or reviewing of offers, and discuss the strategy and how to make it work so that you are comfortable and get what you want at a price to which you’ll agree.