Making an offer on a home involves naming a price, specifying terms, and then negotiating until an agreement is met, right? You might be surprised how complicated things can get during a negotiation process. Realtors are supposed to follow rules and regulations set by state and local governing entities, such as the Ohio Division of Real Estate and Professional Licensing. When it comes to writing offers and negotiating, make sure you have an experienced and reputable Realtor who knows and follows proper procedure. It’s wise to know the facts about engaging in an offer before your agent writes up a contract so you’re prepared for the scenarios that could follow.
Engaging in Offers and Counter Offers
An offer is your expressed interest in purchasing a particular property at a specific price. A counter offer is a rejection of the previous offer with new or revised terms that allows the negotiation to continue. Both sellers and buyers can counter offer as long as both parties want the negotiations to continue and reach an agreement. Here are some facts about the offer and counter offer process you should know in the Greater Cincinnati Area (rules could be different in other areas):
▪ The seller’s agent must present all offers and counter offers to the seller. In other words, a seller’s agent is not able to reject an offer without presenting it to the seller. She’s able to give her opinion of the offer, but she must present it, even if she knows the seller is likely to reject the offer. The only exception to this is if the seller has given written instruction to the listing agent to make such decisions.
▪ After a buyer’s agent has presented his client’s initial offer, he is required to present all counter offers in the negotiation process. He represents the buyer and doesn’t have the right to reject a counter offer on his own. The exception is if the buyer has given him written instruction to handle such decisions. In most cases, buyers want to be in charge of this important decision!
▪ A seller never has to respond to your offer or counter offer. Often you do get a response, but you should know that the seller isn’t required to give you one. Your offer will have an expiration date and time on it. If that time passes and you’ve not heard from the seller’s agent, you can assume the offer was rejected. Even if you find a “non-response” insulting, you can make a new offer if you’re still interested in the house.
▪ A buyer never has to respond to a seller’s counter offer. Again, usually people do give responses, but you aren’t required to do so, particularly if you lost interest in the home. If you let the expiration date and time pass, the counter offer is considered rejected. Your agent will probably ask that you allow him to give the listing agent a response out of courtesy or in the interest of keeping the negotiation going if you’re still interested in the house. But your agent must follow your instruction in this case.
▪ A purchase contract is considered accepted only if both parties have signed it and initialed all modifications from any previous version. The seller or the buyer is able to change their mind and rescind the offer or put it back into negotiation prior to final signatures. The timing here could get tricky. Let’s say you’ve changed your mind and you’ve already signed the contract, the seller has verbally agreed to the terms, and you’re just waiting for his final signature. To get out of what you signed, you’d need to rescind the contract prior to his agent delivering the accepted copy (which is normally done online these days, but is sometimes done in person or through the mail). If you’re the one who has to give the final signature, even if you gave verbal agreement, you may decide not to sign the purchase contract and either void it or make a new offer.
▪ Sellers may accept backup offers in specific instances. Even with a written and accepted contract, a seller may accept backup offers from other buyers provided there is appropriate language in the contract or an addendum that you signed. A backup offer is an offer from another buyer that could be accepted if, for example, your financing to buy the home fell through, or you didn’t perform on one of the other terms of the contract.
Engaging in Multiple Offers
When you bid on a home that you suspect or know for certain is simultaneously being bid on by other buyers, the competition can feel pretty intense. You also want to feel like you’re on even ground with other buyers as far as how the negotiation process is handled. All of the rules mentioned for offers and counter offers apply in multiple offer situations, plus a few extras.
▪ The seller makes the rules whether to let buyers know whether they are the only bidder or if there are multiple offers. The listing agent must follow the seller’s instructions in this matter. Either decision can be used as a selling strategy to give the seller leverage. While it’s natural to think that telling buyers about multiple offers will create higher offers and more competition, the decision to do so could also backfire and scare away buyers who don’t want to drive up the price they pay. Some sellers would rather leave buyers in the dark on that point. Other sellers might prefer to let buyers know multiple people are involved so that their first offer is their best.
▪ The seller decides whether they reveal the competing terms of other offers to buyers. They do not have to reveal what other offers are on the table in terms of price or contingencies. Leveraging the unknown may make others come forward with their strongest offer.
▪ The seller can counter more than one buyer’s offer at a time IF they use appropriate language in all contracts. Contract language with separate parties would need to include that all offers are subject to final written approval of the seller.
▪ The seller does not have to accept the highest offer. They only have to accept the offer they want. While sellers obviously care about getting the most money possible for their home, they’re also interested in other terms such as the closing date, need for inspections or appraisals, cash versus financing, or contingency versus no contingency. For this reason, most buyer’s agents will recommend that you keep terms as simple as possible in a known multiple-offer situation to increase your odds of getting the home.
Real Estate Term of the Week
Performance of Contract: The parties who make the contract must fulfill their obligations according to the terms laid down in the contract.