All at once it happens -- the seller accepts an offer from someone else.

Your first question: How is this possible?

Your second question: What could have been done differently to produce a better result?

To answer these questions, let's review the bargaining process.

The seller is under no obligation to accept a counter-offer. An "offer" is an "offer" -- it's not a "contract." Owners are free to look at -- and accept -- other offers.

Why?

Because a "counter-offer" is really a new offer. Even though buyer and seller might agree to some or even most of the terms of a purchase/sale offer, any change effectively creates a counter-offer. In other words, all previous bets are off and the parties are back to square one in the negotiation process.

Why would a seller accept another offer? It could be that another buyer came in with a higher price, better terms, or fewer contingencies. A competing buyer might have flashed more earnest money in front of the seller. Or perhaps the seller got tired of the tedium and stress produced by offers and counter-offers and wanted to bring the volley to a halt.

How might you do better? Here are three strategies.

Begin with the end in mind.

In other words, know which issues are most important for you as well as what concessions you're willing to give up.

Suppose -- in order -- you require a price limit, minimal closing costs, and a quick closing. If you got one of the three items would that be enough? Two of three? Must you get all three? If you got your price -- the top priority -- but not the other two items, would you go ahead with the purchase?

The trick here is to determine what's important, what's a "must" and what isn't.

Communicate your position.

If a buyer's agent is negotiating on your behalf, explain what you're willing to offer -- and how much is too much. The broker can then look at current market conditions and suggest the best approach to take on the basis of price, terms and negotiating tactics.

If a buyer broker represents you, it's good to write out exactly what the agent can share with the seller and the seller's representative. That way there's less chance that inappropriate information can be leaked to the seller, information which might erode your negotiating power.

Show your interest.

Be honest with the seller about your interest in the property. This doesn't mean revealing all of your bargaining strategies or suggesting a willingness to pay any price. Instead, show just enough interest, involvement and motivation to signal that you're serious.

While counter-offers are designed to let the other party know you're still in the negotiating game, they represent some risk to both buyer and seller. A counter-offer is a new offer, and a new offer may not interest an owner or a buyer. Sensing what to ask -- and when to back off -- are both part of the bargaining process.

Published: June 13, 2001

Use of this article without permission is a violation of federal copyright laws -- http://www.loc.gov/copyright.