The art of the deal is negotiating. The goal, when you're countering a buyer's offer, is to get the highest price and best terms possible. Once you reject the initial offer, you must decide how much to counter. The answer is easy when the market is hot. You will counter at full price or more.
If the market is normal, you may receive less than full price for your property. In this case, one strategy would be to set your asking price higher than normal. How much lower than your asking price will you counter-offer?
Beware of Setting a Minimum Counter Price.
Setting a firm minimum counter price is a big mistake that some sellers make. Depending on the deal and the buyer your counter offer should be flexible. For example, after investigating the market, you set your asking price at $350,000. Your minimum price may be $320,000. If you are offered your minimum, you sell. If you are offered lower, you don't sell. It sounds simple.
Unfortunately, in this mindset, you box yourself into a limited deal. You want to be flexible when negotiating. Let us review our last example. The buyer offers $300,000. The seller rejects and counters with the minimum of $320,000.
The buyer counters with $305,000 again. Where do you go from here? You have already offered your lowest minimum counteroffer. The only recourse would be to repeat your same offer.
One strategy would be to counter lower at $315,000. Or what if the buyer is willing to pay more than your minimum?
The buyer might be willing to pay $330,000. You will actually have lost money again by countering too low.
There are housing situations where you are just lucky to be paying off the mortgage, commission, and closing costs. You might be offered a little less but you accept to some cash to save your credit. In this case, setting a minimum price would be reasonable.
If you do feel the need to set a minimum counter price, don't set it in stone.
Try to Get a Sense of the Buyer
Your counteroffer is not the final transaction. It is one step in the negotiating process. You counter. The buyer will counter your offer. You will then counter back. This process will repeat until the a deal is made.
Therefore, your counteroffer should not be your best and lowest. The buyer's first offer is usually a low-ball offer. A seller's first counter is a high-ball offer. Both parties are testing to see how the other will respond.
Let the buyer know you are willing to negotiate. You ask $340,000, the buyer offers $300,000. You counter $335,000. You must also send the message that you are not willing to drop your price too much.
Some buyers will cave and accept the counteroffer and others will not. Anytime you reject and counter, you are opening negotiations but you are also taking the risk of losing the deal.
There are some buyers who are just looking for a desperate seller. They make a lot of low-ball offers until they find the property. You are not going to find a good price with that type of buyer.
Others will counter with close to what they originally offered, in this case say $305,000 (now you're still $30,000 apart).
What if You're Close Together in Price?
After a few counters, You are only a few thousand dollars apart. You countered at $335,000 and the buyer countered back at $330,000. Now you're only $5000 apart. Should you accept the buyer's counter?
You can simply accept the deal. Another strategy would be to tell the buyer or the agent the you want to split the difference. They accept. You will then have sold your property at $332,500.
Splitting the difference can be an effective way of closing out negotiations to bring about a win-win situation.
What If You're Far Apart?
You counter at $335,000 and the buyer counters at $305,000. You're $30,000 apart. That's serious money.
There are only two ways of handling this situation. You could hold your original counter. The buyer would understand that this is your final offer. This could be a deal breaker. If you are highly motivated to sell, a steep decline of your price would get the ball rolling again. You counter at $320,000 saying this is your best but last offer.
This action could spark the buyer's interest. He/She could accept or at least make a higher counteroffer.
Is There a Time to Walk Away?
There are only two reasons to walk away from negotiations. You are truly angry and will not lower your price.
The second is for effect. You are willing to take less, but you want the buyer to think you've made your last, best offer. You say, "Take my last offer or leave it. I'll give you an hour to decide."
As a tactic, walking away can start negotiations. You could get your price or lose the deal.
There are no guarantees when negotiating real estate. The final outcome is often determined by the following percentages:
10%--how good you are at negotiating
45%--how motivated you are to sell
45%--how motivated the buyer is to purchase