How to respond to a counteroffer on a house

How offers and counters work

Freddie Mac's homebuying guide explains that your offer includes the price, terms and conditions, a target closing date and a deadline for the seller to accept or counter, typically one to two days. The seller's agent sends any counteroffer to your agent with the changes. You can then accept it, reject it, or counter again. The back-and-forth continues until one side accepts or rejects, and the contract is final when both parties sign the same written terms.

Two practical points follow:

• Only the latest version matters. Once you counter, do not assume you can go back and accept the seller's earlier terms; the seller is free to decline.
• Signatures and deadlines count. A verbal yes is not an accepted offer. Make sure acceptance is signed and delivered before the stated deadline.

Your three options

Accept. If the counter fits your budget and needs, sign it before the deadline. You are then under contract, and the clock starts on deadlines like inspection and financing.

Reject. If the gap is too large or the seller added terms you cannot accept, you can decline and move on. Freddie Mac notes you can always keep looking if you have not signed a contract.

Counter again. Freddie Mac points out that your counter may address some, but not all, of the seller's concerns. For example, you might agree to the seller's higher price only if the seller covers some closing costs or leaves an appliance.

Terms to trade besides price

Freddie Mac lists the terms most often negotiated:

• Purchase price. Your preapproval sets a maximum, but you do not need to go up to it.
• Closing costs. Freddie Mac calls these often the most negotiated line item. A seller credit toward your costs can be worth more to you than a small price cut if cash is tight.
• Closing date. A seller who needs time to move may value a later date, or a quick close.
• Contingencies. A seller may try to remove or shorten your inspection, appraisal or home-sale contingency. Talk to your agent about the risks before agreeing.
• Earnest money. A larger deposit can show commitment without raising the price. Freddie Mac says earnest money is typically 1% to 2% of the price and applies to your down payment or closing costs.
• Personal property and repairs. Appliances, furniture, window treatments or specific repairs can be part of the trade.

Learning what the seller cares about most, through your agent, helps you offer what is cheap for you and valuable to them.

Keep the whole cost in view

Every change shifts your numbers. A higher price raises your down payment, loan amount, monthly payment and possibly mortgage insurance. A later closing may require a longer rate lock. A seller credit lowers your cash to close but may be limited by your loan program. Before each response, update your estimate of the monthly payment and cash needed. Freddie Mac's advice is to stick to a price point you know you can afford, counting insurance, taxes, maintenance and utilities, not only the mortgage.

Also check that a higher price still makes sense for the appraisal. If the price rises well above recent sales, you may face a gap if the appraisal comes in low.

Managing the paperwork

• Respond in writing through your agent, with a clear deadline.
• Keep every version. Multiple counters can get confusing; know exactly which terms are current.
• Watch for multiple counters. In a competitive market, a seller may respond to several buyers. Ask your agent how the seller is handling offers.
• Do not let emotions lead. Freddie Mac suggests going back to your wish list. If a home checks your top boxes, get creative; if it does not and talks are stalling, look at other homes.

The bottom line

A counteroffer opens a negotiation. Read every changed term, recheck your budget, and decide whether to accept, reject or counter before the deadline. Trade the terms that matter little to you for those that matter to the seller, keep each signed version, and remember you can walk away until a contract is signed.