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Understanding Counter Offers Can Have Its Benefits
| | Tuesday, June 24, 2003 @ 05:00 AM EDT
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Contributed by: Daniel Cobb
Daniel Cobb Properties
Read more archived articles about Buying
The counter offer is a vital part in the negotiating process of purchasing
real estate. It can often determine if you get a good deal or a less
favorable one. Ironically, most people (including most real estate
professionals) never really have or use a strategy that makes counter offers
work in their favor.
When dealing with counter offers the number one mistake most people make is not having a method to determine
each counter offer's anticipated purchase price. The problem is that when finding an anticipated purchase
price for the next counter offer most people tend to just take the amount that is in the middle of the last two offers on the table (see table 1 below).
Table 1
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Original asking price
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Buyer's offer
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Seller's counter offer
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$100,000
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$90,000
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$95,000
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A much more effective way of choosing a counter offer's anticipated
purchase price is to start with a predetermined group of percentages that
decrease in value. For example: 55%, 40%, and 25%. Then when
it is time to make a counter offer use the group of percentages to determine
the counter offer's anticipated purchase price. In this example:
the first counter offer would be 55% of the in-between amount of the first
two offers on the table, the second counter offer would be 40% of the in-between
amount of the last two offers on the table, and the third counter offer
would be 25% of the in-between amount of the last two offers on the table.
When dealing with counter offers using this technique will benefit whoever
uses it (buyer or seller) in several ways:
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It will let the other party involved in the transaction (buyer or seller)
know that the final offer is close to being made.
-
It will help to make the negotiating process quicker by creating fewer
counter offers.
-
It will help increase the chances of an offer being accepted because the
other party involved (buyer or seller) will anticipate the final offer
being reached.
It is important to remember that the percentages used in this technique can
vary per individual person or deal. There is no strict formula for
this technique except that you counter with a
preset percentage of the in-between amount of the last two offers on
the table and decrease the percentage used in the formula with each consecutive
counter offer made.
Lastly, it is important to remember that the asking price is not the
only thing that is negotiable in real estate transactions and that other
elements of the contract such as down payment amount, closing terms, etc.
can be used to help leverage the negotiation of the asking price.
Note: Daniel Cobb has written the EBook Complete Guide To Investing In Real Estate Through Government Scavenger Sales.
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