Are Counter Offers Counter Productive?

By Brett Woolley
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There is a time and place for counter offering. However, many real estate agents believe that counter offering on price alone is not only to be expected, but is actually their strategy when counseling both buyers and sellers. I have discussed this strategy countless times over the years of giving workshops to real estate professionals nationwide. Almost without exception, and when pressed to reveal the truth, the story does not turn out well for either side when counter-offering on price gets out of control. That leads me to wonder why so many agents do this. I have to believe that it is largely part of the way real estate has been conducted for decades, sort of like some middle-eastern marketplace where you would haggle over a Persian rug.

I remember well the agent who helped me purchase my first home.  He would say “the best offer to make is the lowest offer that a seller will take without countering.” Over the years I have witnessed time and time again the wisdom of that philosophy. Think about it. In the first place you are counseling your buyers not to low-ball but to make a good offer. Secondly, the very dynamic of the offer/counter offer tends to pull people apart and not bring them together.

A friend of mine from Northern California just went through this scenario. At first he was excited about buying the home and made what he thought was a fair market offer. He didn’t back up his offer with any rationale as I would have done had I been representing him. The sellers came back with a counter offer that was no where near the buyer’s price. So my friend countered again and went up $10,000. The sellers responded with yet another counter offer and they reduced a mere $2,000 leaving a gap between the two parties of over $20,000. Never at any time did either party (or their respective agents) attempt to explain their positions with facts. The buyer countered a third time and reluctantly came up another $10,000 and this time the sellers took it after a weekend of no competing offers.

After all of the haggling the buyer was exhausted and when termite and other problems were found during the contingency period, the buyer canceled the contract. I asked why he didn’t ask the seller for repairs and try to keep the deal alive. His response was “I don’t even want to buy that house anymore.” The whole transaction had soured. Many of you have heard, or maybe experienced, this scenario. I believe in making good offers and then backing that offer up with what I call an “Offer Rationale Addendum” where facts are used to support and explain the offer. In the case of a seller the same strategy can be effective. Make only one counter offer and back it up with some facts. The vast majority of agents never attempt to explain how they arrived at their price and yet they can all do a CMA. Most believe in the haggling process and whoever lasts longest wins. And yet, in a large number of cases the counter offer process is counter productive and both sides lose.

BrettHalf2Brett Woolley is a professional Buyer’s Agent specializing in helping clients buy homes in the Gilbert, Mesa, and Chandler AZ areas. Contact Brett at 480-236-2735 for a no-obligation buyer consultation.


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