Offer, Counter-offer, and Negotiation
An offer consists of the buyer’s terms and conditions for purchasing your home. You will receive written offers presented on a standard document called the “Contract of Purchase
and Sale.” A Contract of Purchase and Sale contains a variety of provisions that you should make sure you understand.
The typical contract includes the following clauses:
◾Purchase Price: the amount the buyer offers to pay for the property, which can differ from the seller’s asking price
◾Terms: refer to the offer price and financing
◾Deposit: usually a percentage of the offer price made by the buyer to signify the seriousness of the offer to buy the property. This deposit goes toward the purchase price once the sale closes
Inclusions and exclusions: denote objects that are made a part of the purchase price of the property
◾Conditions: this concerns certain things or events that must take place before the deal can close
◾Closing Date: this is the date the seller transfers the property to the buyer.
Brace yourself for the possibility of receiving offers nowhere close to your asking price and terms. Buyers might offer your asking price but make the transaction subject to certain conditions.
The rules require your agent to present all offers to you. Consult with your agent and decide whether to accept, reject, or counter-offer. If you do not understand a particular clause or its consequences, have your agent or attorney clarify it for you.
Evaluating an Offer
In a seller’s market, depending on the desirability of your property, you have buyers lining up to outbid one another for your home, which has been the case in some areas of Vancouver.
When you review an offer, measure the offer against your objectives and decide what is acceptable to you.
Some factors you may want to consider include:
◾How close is the offer to your asking price?
◾Does the offer exceed your asking price?
◾Does the offer contain conditions that makes it less attractive?
◾Should you make a counteroffer?
◾Does your timeframe allow you to wait for offers that are more acceptable?
If you have yet to receive the type of offer you want, and your property has been on the market past your anticipated duration, you might want to consider accepting an offer in lieu of being stuck with paying mortgages taxes and insurance for the next month or two.
Evaluate each offer based on the price and conditions. Determine if the condition costs you more money, works against your stated objectives, or compromises your interest in any way.
Some sellers receive multiple offers from potential homebuyers. The highest offer does not equate to the best offer.
For example, one potential buyer offers you the full asking price but makes the deal subject to selling their current home. Another prospect presents a “clean offer,” but two or three thousand dollars less than your asking price. Of the two offers, the latter offer would likely make the best choice for the seller.
Be diligent for red flags in the offers presented by buyers, including offers containing terms like no cash down payment, you returning cash to the buyer, or requiring your equity to consummate a deal or refuse to include terms in writing.
This is not to say that you should not consider an offer because it contains ”creative financing” elements. Make sure you understand the potential pitfalls and financial consequences of the employing the techniques. Discuss the terms with your agent and attorney before agreeing to such conditions.
How Counter-offers Work
When you make you home available for sale, you are actually making an offer to prospective buyers. You put for an asking price and other terms, such as pre-approved buyers only or possession 30-days after the closing date of the transaction.
A prospective buyer has three options:
◾“I am not interested in the offer.”
◾“Yes, I will purchase the home at the seller’s asking price and terms.”
◾“I am interested in the property, but I do not accept the terms, and here is my counter-offer.”
The counter-offer is simply a new offer. You have the same options of response as listed above.
How to Handle Multiple Offers
Each buyer’s agent will present the buyer’s offer to you. Listen to the buyer’s agent discussion of the offer and compare what is in the Contract of Purchase and Sale. Discuss each offer with your agent or attorney. Pay particular attention to the time you have to respond to each offer.
Decide which offer to accept, or make a counter-offer. You can only counter one offer. You may advise the competing buyers of receiving multiple offers, and give them a chance to make their “best final offer” for purchasing your Vancouver home.
Having someone who can negotiate with prospective buyers on your behalf underlies one of the key advantages to selecting an agent who has familiarity with your neighbourhood and the general Vancouver real estate market. Your agent has practical experience in the world of offers and counter-offers and can identify clauses and conditions that work against you or for your benefit.
Resist viewing the negotiating process as having to produce a “winner” and “loser.” It represents a natural process of conducting real estate business, where each party treats the other person with respect.
At this point, you have determined your goals and baseline requirements for selling your Vancouver home. You do not have a legal responsibility to accept an offer or make a counter-offer. You can completely ignore any offer. However, if a buyer makes an offer that meets your asking price and other terms, as outlined in the Listing Contract, you might have a legal responsibility to pay the real estate commission.
After you accept an offer, start the process of packing your remaining stuff, contacting movers for price quotes, and preparing to move.