This is part 5 of a 10 part series of FAQ questions and answers about the real estate process from the buyers’ perspective. At this piint in the process you've just made an offer on a house. What should you expect will happen next?
Answer - Your Realtor will transmit your offer to the listing agent for presentation to the seller. In some places your agent may request the opportunity to actually present the offer to the seller; although that doesn’t happen much anymore here in Michigan. On most offers there will be a deadline for a response, usually a day or two; however, if you have made an offer on a foreclosed house or a short sale, don’t worry too much about that deadline - the other side will answer when they damned well feel like it. Get used to that in a distressed sale.
One of several possible things will happen after the listing agent gets the offer.
Your offer may be accepted as it, in which case, you can move on to the next post in this series.
The seller may reject your initial offer, but make a counter offer. In this case your agent will call or arrange to sit with you again to go over the counter-offer and give you his/her advice. The counter offer is most often made by just scratching out words and/or numbers on your offer and the seller writing in what is acceptable to him/her. This most often occurs when the original offer was very close to what the seller will take, so he/she changes the dollar amount on the Offer form, or to deal with a difference in a term or condition, such as occupancy. It could also revolve around something that you asked for that the seller is not willing to give, such as an appliance.
The seller may return a form called a Sellers’ Expression of Intent. This is a form of rejection of your offer that keeps the process alive. The sellers are basically saying “I do not accept your offer; however, if you were to return with an offer that contains these changes (they will list their requirements) I would favorably consider that offer.” Sellers sometimes use this method because it does not tie their hands from looking at other offers (after all they’ve expressly stated that they are not accepting your initial offer). You agent will have to start over with a new Purchase Offer form, but at least they have expressed interest in continuing to negotiate with you. Try again with the changes that they have asked for (or at least all that you can agree to do) in their reply.
The seller may just reject your offer with no counter-offer. The seller is not really required to make any counter-offer. An outright rejection often happens when the original offer was a "low-ball" offer or had some conditions that the seller doesn't want to consider, such as a contingent offer (an offer that is "contingent" upon the sale of the purchaser's current home prior to the finalization and closing of the house being offered upon). If the seller rejects the offer, without a counter-offer, then you would need to start all over with another offer, if you still want the house. At that point you would get your earnest money back, until such time that you make another offer. If you plan on making another offer fairly quickly, just leave your earnest money in escrow and arrange to apply it against the next offer.
If your offer elicits a counteroffer of any sort, you will likely become involved in negotiations at this point, so here’s an interesting article from Realtor Magazine on how to negotiate without being a jerk. I’ve certainly been involved in negotiations on both sides where one of the parties was being a jerk about it and it’s not fun nor is it productive. The other things that I’ve seen over time is that deals worth hundreds of thousands of dollars can, and do, fall apart over issues or items that are worth only a few hundred dollars. You must keep things in perspective during this negotiating process and keep yor eye on the goal of owning the house, not on seeing how much you can squeeze out of the deal.
Keep in mind during these negotiations that the seller has effectively taken his property off the market while he/she dickers with you. The seller is not going to want to keep the home off the market for long. That works for and against you – the seller will want to get to a decision quickly (good for you), but he/she will also not want to screw around with someone who doesn’t seem serious enough to get to a conclusion quickly. The message here is “don’t play games – you’ll lose.”
If the seller rejects your counter to their counter-offer, be prepared to move on. They’ve had it with you for now and may not even entertain future offers from you. You’ll have to start over with a new offer. At that point it’s time to reassess whether you really want this house. If your answer is “yes”, then it’s time to stop screwing around and make an acceptable bid – you already know what the seller wants. If you really don't believe that the house is worth what the seller wants, then let it go and move on.
If you made a bid on a foreclosed house or a short sale, be prepared for a counteroffer from the bank that is essentially a new offer from them with their terms and conditions. You’ll need to go over that counter-offer with your agent. You need to be careful to understand all of the terms and conditions in the bank’s counter-offer, because some of them may have penalties if you don’t meet their deadline for closing and there may be other terms and conditions that are not advantageous to you. Many banks are now requiring the buyer to pay some of the costs that the seller used to pay, like state taxes and fees. Some are even refusing to pay back property taxes and requiring the buyers to bring those taxes up to date.
Make sure that you understand any and all extra costs involved with buying that foreclosed house, so that you can evaluate whether the house is still a good deal. Also remember that the banks are not required to supply any information about the condition of the house, such as Seller’s Disclosures. They are still required to give you some form of Lead-based Paint Disclosure.
If this is a short sale, you might as well settle in for the long haul. Lenders are still taking 5-6 months to get through the short-sale process and you may be required to update your loan application before this thing even gets a decision. It is up to you to decide whether you want to spend the money up front for a home inspection or wait until the bank approves the short sale. Some banks may require that you do the home inspection and the appraisal at the start of the process, which means that you could have around $1,000 sunk into the house before you even find out if the bank will approved the short sale.
Let's hope that the seller either accepted you initial offer or that you were able to negotiate a deal that both find acceptable; let's move on from here to part 6 of this series. We'll deal with rejection in part 7.
