Understanding Offers and Counteroffers in Illinois
Illinois may be known as the Prairie State, but it’s also a great place to buy a home. However, navigating the world of offers, counteroffers, and earnest money can be tricky to those new to real estate.
This brief guide for understanding offers and counteroffers in Illinois is here to help you find the home of your dreams while also providing a better idea of how to maneuver through the negotiation phase as seamlessly as possible.
Definitions
First, let’s establish the distinction between an offer and a counteroffer.
An offer refers to a formal offer to purchase a home or plot of land. It’s typically put in writing via a Contract to Purchase, which is a formal legal document laying out all the terms and conditions under which a buyer is prepared to purchase a home, including the purchase price and any repairs the buyer expects the seller to make prior to finalizing the home purchase.
Offers can be made, typically on commercial transactions, with a “letter offer outlining terms and conditions such as price, time to close and other key terms which in order to be binding is formalized in a Contract to Purchase.
When buying, keep in mind that anything agreed to verbally may be held against you at a late date, depending on the promises made, even if prior to the actual written offer. This is why it’s important to convene with an attorney prior to making any promises. The written contract will usually supersede any terms but please consult with an attorney before getting yourself where you may not want to be.
Along with the written offer, earnest money is usually required, though the amount varies. This refers to the deposit made to a seller’s attorney typically at the time an offer is made as a show of good faith.
If an offer is rejected, the other side may present what’s known as a counteroffer, essentially a variation on the original offer you made to the seller. The seller can in return ask for a wide variety of amendments to the contract, including price, dates, fixtures in the home, contingencies, a more immediate closing date, or the seller may want to stipulate that a particular home repair is your responsibility and not their own.
For buyers receiving a counteroffer, remember that this is a good sign. The seller could have rejected your offer outright or simply let it expire, but instead, they demonstrated interest in you as a buyer. This is then your opportunity to either A) accept the seller’s new terms, or B) send back a counteroffer of your own. Essentially, this process goes back and forth until both parties have come to an agreement or they decide to part ways.
How does an offer work?
In essence an offer boils down to four key steps:
Creating Your Offer
Submitting Your Offer
Negotiation
Acceptance
Once you find the home of your dreams, it can be tempting to jump on it immediately and make an offer. However, we advise consulting with an attorney first, to ensure that a formal offer and the earnest money is submitted properly. It is difficult but you should try to not be emotionally invested in the property until after you close.
When creating your offer, the contract includes all the terms and conditions of your offer. This entails the price, closing date, size of your down payment, your earnest money deposit amount, inspection and financing contingencies, the breakdown of closing costs, and other variables involved in the sale.
Once your offer is ready, your attorney and/or real estate broker will make every effort possible to present your purchase offer in person to the seller’s attorney and/or real estate broker. The seller’s team will then discuss the offer at hand with their client(s), and it will either be accepted or rejected.
However, the seller has the right to make a counteroffer – and that’s where things can get complicated.
In the event of a counteroffer, the buyer’s side will reconvene and discuss the seller(s) amended request. This is where a wide variety of negotiation strategies come into play. Depending on how quickly you’d like to close, the number of competing offers, and other factors, your attorney will present different suggestions for how to approach the negotiation phase.
This can go back and forth for several rounds, though there’s no limit. Assuming both sides eventually reach a compromise, the home buyer and the home seller will enter an attorney review period, a period in which both you and the seller have the right to withdraw from the deal with no penalty. This is unique to Illinois law and a few other states.
Next Steps
Regardless of what stage you’re at in the negotiation process, consulting with a real estate attorney will ensure that you aren’t caught off-guard, both as a buyer and a seller. Considering that buying a home is one of the largest investments you will make, the modest amount you will spend on an attorney can save you thousands if you have problems after closing.
For help with closing a residential real estate transaction, send us a message at LeePerres.com.
