Receiving a purchase agreement offer

One common question that comes up with our home sellers is "How do I make a counter proposal to an offer I have received?" First, it is helpful to review the basics of offer and acceptance in real estate:
When a buyer presents a purchase agreement form fully completed and signed by the buyer, it is referred to as an offer. Purchase agreements are also known as purchase contract, sale agreements, purchase and sale agreements and probably some other terms depending on where you live. They generally consist of a multi-page document plus addenda (a fancy word for an additional form that describes other parts of the offer, most common being an inspection addendum).
Responding to a purchase offer
When the buyer (or buyer agent) delivers the offer to the seller, the seller has three options on how to respond to the offer:
1. The seller can accept the offer if 100% of the terms described are acceptable to the seller. Generally, the seller just needs to sign the offer in the signature lines marked "seller" for this to happen.
2. The seller can reject the offer, which generally means the seller isn't interested in further negotiations with the buyer. More realistically, or in practice, it really means the seller would love to negotiate a higher price, but the buyer's starting price was so low they don't think it is worth their time to make a counter offer. In some areas it is common to reject the offer in writing, in other areas, a call to the buyer or buyer agent telling them their offer is rejected suffices.
3. The seller can create a counteroffer, which technically means the seller has rejected the initial offer and made a different offer to the buyer. The counter offer can be verbal or in writing, depending on the situation and the preferences of the parties involved. A counter offer could be as simple a statement as "we will accept your offer if you change the closing date from the 15th to the 14th" to the other extreme of listing 20 or more items that need to change in order for the agreement to be acceptable to the seller.
Counter Offers, also known as counters, counteroffer, counter proposal.
Another common question I get is "how should I counter this offer?" If you wish to counter offer, my experience and opinion is to generally suggest counter offering verbally instead of in writing for two reasons:
1. Speed. Calling the agent enables the buyers to quickly receive the information, without the agent needing to go to their office to pickup a fax. Remember, a buyer certainly may respond to your counteroffer with a counteroffer of their own, and getting all the parties signatures and then getting to a fax machine, then the recipient may need to travel to their fax machine or computer, all these things slow down the negotiation. In my experience, slowing down the negotiations generally makes an agreement less likely, although there are many exceptions to that statement.
2. Avoiding an open ended commitment. Even with a counter offer termination date and time specified, the situation can often change quickly. A second buyer can materialize without warning, and if you have issued a written counter offer you often must wait to get confirmation that the counter offer has not been accepted, putting the seller in limbo for a period of time. Keep in mind if a second buyer does come forward there is generally an ethical obligation to make sure that the first buyer knows that a second buyer is making an offer. We also strongly suggest giving the first buyer 3-24 hours to revise their offer now that they know it is a competitive offer situation, as it gives buyer #1 and buyer #2 the same information while formulating their bid (it is also generally improves both the offers).
Once buyer and seller come to a verbal agreement, then it is critical that the verbal agreement be written up and signed by all parties immediately. Either the buyer agent can write up the agreed upon changes, get their buyers signature, and forward to the seller, or the seller can initiate the process.
Important: If you wish to have advice or representation, please see an attorney. Consult an expert on the specifics for your situation, customs in your market, and the regulations for your area.