Once a buyer makes an offer on your home, it can be confusing to know when it is appropriate to make a counter offer. After all, you don't want to scare away buyers who consider their offers completely reasonable by coming back with a counter offer they disagree with. At the same time, you certainly don't want to sell your house for less than it's worth, especially if there may be someone out there willing to pay your asking price. 

If you do decide to counter offer, it is important to think hard about what changes to the original offer will seem reasonable to the buyer and not just what seems right to you. 

Components of an offer

There is a lot more that  makes up an offer than what a buyer is willing to pay for the house, and sellers should keep them all in mind when considering whether to make a counter offer. Cathy Baumbusch, a real estate agent with Re/Max Executives in Virginia, explained to Realtor.com that a standard offer contains information regarding price, closing assistance, closing date, buyer financing and contingencies. Sellers need to make sure they are okay with each and every one of these factors and not only the price. For instance, a buyer may want to move in before you will be ready to move out or he may be asking for help with covering the closing costs. It is normal for sellers to assist buyers with 2 to 3 percent of closing costs, so if it is any more than that, consider whether the request makes sense - and also whether you can afford to pay it. 

Contingencies are situations in which the buyer would be allowed to change his or her mind and drop out of the deal. Offers, for example, are generally contingent upon the completion of a successful home inspection that does not reveal any major issues. 

The San Francisco Chronicle emphasized the importance of confirming the buyer is in a position to pay what has been offered. Has he or she been approved for a mortgage? Has his or her down payment been placed in escrow? Realtor.com explained that there should be a note proving the buyer's ability to pay included in the offer. 

When to counteroffer 

According to My Realty Times, once a seller signs his counter offer, he or she has legally rejected the buyer's initial offer. He or she cannot go back and accept it later. Thus, it is important for a seller to spend some time carefully considering whether he or she should make a counter offer. Once the counter offer is made, a buyer can reject it and walk away, accept it or make another counter offer.  A real estate agent is the best resource to help you determine not only if a counter offer is the best choice, but also what changes you should make to the original offer. Again, it is not only about shifting the asking price. Make sure to carefully consider every component of the offer. 

"You should always counter if the price is not what you are looking for, or if you can't support the amount of closing cost help they are looking for," Baumbusch explained to Realtor.com. 

The website added that sellers should pay special attention to the time frame. If the deal falls through, you will have to start the entire process over again, so consider that possibility when a buyer requests a certain amount of time before closing. 

You should also think about whether it is a buyer's or a seller's market. In a buyer's market, it could be dangerous to counter offer, as the buyer can easily move on to other similar properties. In a seller's market, you have a little more leverage. The buyer will know there isn't much else out there, and he or she will probably be more willing to negotiate. 

How to counteroffer

When you do counter, think about the offer from the perspective of the buyer. Will he or she find it outlandish or will he or she understand the changes you have made? 

When negotiating, your focus should be on offering something reasonable and acceptable, rather than perfect.  If you become too focused on getting exactly what you want, the negotiations probably will not go well. The Chronicle discouraged sellers from negotiating over a few thousand dollars. You don't want such a small amount to cause a deal to fall through. If your counter offer includes a change to the price of the home, it should fall between your asking price and the price offered by the buyer. 

Other factors you could consider addressing in your counter offer, according to My Realty Times:

  • A tighter deadline on when the buyer has to satisfy certain contingencies (such as getting a home inspection)
  • Asking for a larger deposit
  • Offering more or less personal property to be sold along with the home. 

Anything is fair game, but a sellers really must consider where the buyer is coming from. Try to understand why he or she has asked for certain things in the original offer so you don't make any changes that may strongly upset him or her. 

The Chronicle urged sellers not to reveal the lowest price at which they would be willing to sell their property. If the buyer discovers this magic number, he or she will not demonstrate a willingness to pay anything higher. Make sure to keep this information private so the buyer does not hold all the cards.