If you’re currently buying or selling a residential property in Australia, it’s crucial to understand what a counter offer on a house or property is and how they work. Using one effectively will stand you in good stead in the negotiating process.
What is a counter offer?
A counter offer is a reply to an original offer that proposes amendments ranging from the price of the property — the largest and most important sticking point in most real estate negotiations — to a range of other considerations. These could include the length of the settlement, the size of the deposit, or who is responsible for any necessary repairs.
A counter offer usually comes from the seller in response to the buyer’s first offer. After which, negotiations can go back and forth until one party withdraws from the negotiations or both agree to mutually acceptable terms and jointly sign a contract of sale.
How long should you wait for a response?
There is no hard rule when it comes to timeframes for a counter offer on a house or property. Generally speaking, however, you shouldn’t have to wait more than 48 hours for a response. If the other side takes longer than that to reply, it may indicate that they’re not overly serious about the deal and their heart isn’t really in it.
Neither side is legally obliged to respond, and a seller may be inundated with offer. So, they may not get around to replying to yours. However, their agent should be able to inform you of what’s going on within the 48-hour period and whether you need to drastically adjust your counter offer to still be in the running for the property.
How many times can you counter offer?
There are no limits on the number of counter offers each side can make. Negotiations may go back and forth like a ping-pong game until both parties find the terms and conditions acceptable.
There are also no hard deadlines regarding when to place a counter offer. For example, suppose a building or pest inspection reveals issues you were previously unaware of. You can bring them to the seller’s attention via a counter offer even if you already have a verbal agreement. Remember that nothing is set in stone until you have exchanged contracts and paid the deposit. And, even then, you typically have a cooling-off period of up to five business days as the buyer.
» MORE: What does ‘under offer’ mean?
What should you include in a counter offer?
When putting together your counter offer as a buyer, you need get around the sticking points in a way that appeals to the seller. You also need to stick to your predetermined budget. If the vendor wants way too much money, there is not much point in progressing.
At any rate, you should be prepared to negotiate after reviewing the seller’s counter offer. At least try to ensure that your offer is fair based on the state of the home and the property market in the area.
You also may want to compile a quick checklist of things to include, such as:
- A deadline for them to respond to your offer
- An acceptable timeframe for paying the deposit
- The settlement date, which the vendor may want pushed forward from the usual four to six weeks so they can get their hands on the money sooner.
You also may want to include things like repairs and renovations, which may be urgently required. Though, anticipate that the seller may not be willing to pay for them.
Whatever you decide to include or not, you should send your counter offer to the seller’s agent as soon as possible so they’re not kept in the dark about your intentions. In such a scenario, the agent may start actively looking for other buyers (if they haven’t already). By showing you are keen, you’ll have a better chance of negotiating a mutually agreeable conclusion.
What to consider when countering
A counter offer on a house or property can be good for both sellers and buyers. Much will depend on the state of the market and how in demand the property is at the time of sale. For sellers, it could be a way of extracting a higher sale price or a shortened settlement period. Alternatively, it may be possible for buyers to negotiate a lower price or get the vendor to make repairs or renovate before contracts are exchanged.
With any luck, you will have already put considerable thought, time and effort into your original written offer, so your counter offer should not require significant reconstruction. Having said that, it’s always a good idea to get a real estate expert, such as a mortgage broker or conveyancing solicitor, to help you compose your counter offer as they should have a good idea about what to include and what to omit.
You should make your counter offer as precise as possible so there’s no room for confusion on the other side. Specify what it is you are happy with and what you would like to tweak slightly. Be aware, however, that it may be difficult to meet in the middle. Especially if the seller’s counter offer is way out of sync with your original offer. In that case, you may be better off just pulling the pin and looking elsewhere.
Alternatively, if their proposal is reasonable, you may want to move quickly. Doing so will help you avoid being gazumped, where the vendor may have agreed to your offer verbally, but since you had nothing in writing, someone else snares the property by making a better offer.