Counteroffer

Published on :

21 Aug, 2024

Blog Author :

Wallstreetmojo Team

Edited by :

Ashish Kumar Srivastav

Reviewed by :

Dheeraj Vaidya

Counteroffer Meaning

Counteroffer refers to an offer placed against another offer. It happens when the recipient of the offer is unsatisfied with the offer received and quotes an amended offer in response to it. It won't take place if the recipient accepts the original offer.

Counteroffer

Its application is common in real estate businesses, salary negotiations, automobile sales, mergers, acquisitions, etc. It promotes the scope for discussions and mutual concessions. Its successful execution leads to a productive negotiation process, thus helping parties involved obtain a favorable outcome. 

Table of contents
  • A counteroffer is an offer made in response to another offer. It occurs when the recipient quotes an updated offer in response to the first because they were dissatisfied with it.
  • It covers three important aspects: accept the offer, reject the offer, or renegotiate the offer. Naturally, the price, timing, and conditions play an essential role in the procedure.
  • It is used at several points, such as during real estate transactions, salary negotiations, automobile sales, private placements, mergers, and acquisitions. 

Counteroffer Explained

A counteroffer is a response following the initial offer between the seller and the buyer. For example, when two parties, the seller and the buyer, negotiate a business deal, the first party puts an offer in front of the second party. The second party may respond with a different proposition than the first one. The second party's offer can include changes in the price or terms and conditions. The price can be more or less compared to the original price depending on the parties to the business deal. 

The absence of consensus between both parties can result in a series of offers. In addition, each party may counter many times during negotiations. Therefore, it makes sense to write down particular objectives or desired results and open the door of negotiations for both parties to the contract for the successful closure of the deal. 

In a buyer-seller arrangement, If the buyer is closer to the latest offer, it signals to the seller that the buyer is interested in the deal. The parties involved reach an agreement when any of the offers in the negotiation process get accepted. They must agree on terms and conditions in line with the agreement. It is also a time the contract or agreement is attached to both parties. Therefore, the parties already have expectations and anticipation about what will come out of the agreement.

How To Write A Counteroffer?

The most effective technique to present a counteroffer is in a formal letter, specifically during the job offer negotiations. For example, when a candidate is unsatisfied with the initial job offer, they formally write to the hiring manager to make a salary counteroffer or job counteroffer. The person typically expresses interest in taking the job but wants to negotiate over the terms. The letter may be sent via email or regular mail.

Let's look into some important things to be followed while preparing the counteroffer letter:

  • Follow the rules of business letters 
  • Include contact information
  • Use professional languages
  • Emphasize the interest
  • State counteroffer in a courteous and professional tone
  • Conclusion with effective restatement and summarization

There are certain steps to be followed while writing a counteroffer letter : 

  1. The email's subject line should contain the buyer's name and the reason for the counteroffer.

  2. Write a letter according to the rules of business letters. Include a header with personal information, contact address, email, and phone number. Write the seller/employer's name on the letter.

  3. Introduce yourself by highlighting your passion for the company and one or two major reasons why they would make a great client/employee.

  4. The buyer/employee can indicate general changes that must be made up until the meeting. Alternatively, include a list of the modifications in the letter itself. Indicate the original offer, the counteroffer, and the reason the buyer's or employee's counteroffer is appropriate by the original offer in each paragraph.

  5. In conclusion, emphasize the reasonable request and reiterate how thrilled they would be to work for their company.

Example

Let us look at an example of a counteroffer to understand the concept better:

Albert wants to sell his house, and Ann is interested in buying his house. So, Albert makes Ann an offer to buy it for $300,000 in 48 days. Ann makes a counteroffer for $250,000 in 30 days. Even though the price is lower and the payment period is shorter, the original offer stands null and void. Albert can accept the offer at $2,500,000, reject the counteroffer, counter again at a different price, or let the offer expire. 

Counteroffer In Real Estate

A real estate counteroffer follows when someone wants to buy a real estate property and submits an offer to the seller. The seller is unsatisfied with the proposal and follows up with a counteroffer, informing the buyer of the alteration of one or more of the terms of the offer according to the seller's satisfaction.

In the real estate investing or business scenario, it might be made for several reasons, some of which are more frequent: to adjust the final sum of the property, to change the deadline days, or to alter certain terms and conditions in the agreement.

The total number of it arising out during the deal can be many. A real estate counteroffer may not necessitate a response from the seller in some conditions. The majority of deals have an expiration date. The listing agent may inform the buyer that the seller is rejecting the counteroffer if the seller doesn't respond by that time. The seller is not typically required by law to reject the offer in writing.

Frequently Asked Questions (FAQs)

What does a counteroffer mean? 

It is a revised offer that fundamentally modifies the terms of the previous offer and a rejection of the previous offer to enter into a contract. Accepting it makes the initial offer entirely worthless since it acts as a denial of the initial. As a result, the previous offer cannot be honored.

How to decline a counteroffer?

Communication of rejection might take the form of a letter, email, or phone call. Still, it should always be done politely since the wisest course of action is respectfully rejecting a counteroffer. Using tact while rejecting an offer is necessary, specifically in case of job opportunities. One does it in a way that won't damage their reputation in the field.

Does a counteroffer terminate the original offer?

Yes, the first or original offer is completely void if a second or new offer is made subsequently. When an offeree makes a new offer in response to an offer, it does so on a different set of conditions. As a result, the original offer is discarded and no longer available for the offeree to accept. Once a formal acceptance occurs, a legally binding agreement is created.

Recommended Article

This article has been a guide to Counteroffer and its meaning. We explain how to write it, an example, and a real estate counteroffer. You can also go through our recommended articles on corporate finance -