Negotiation, counterproposals and multiple offers
Practical Application · 4 study hours
Bottom line: Present every offer promptly, keep price and motive secrets, and compare competing offers by net to the seller, not by headline price.
Maya's Louisville listing from lesson 2 (list price $575,000) has been on the market four days. Three offers arrive before Sunday night. This lesson shows how she handles them.
Step 1: the duty to present all offers
A seller's agent must present all offers to and from the seller in a timely manner, even if the property is already under contract (C.R.S. 12-10-404(1)(c)(II)). A buyer's agent presents all offers too (C.R.S. 12-10-405(1)). A transaction-broker must present all offers and counteroffers in a timely manner (C.R.S. 12-10-407(2)(b)(I)). She does not sit on a low offer because she thinks it will fail. The seller decides. Her only discretion is how fast she gets them to the seller: promptly.
When she holds an offer from a buyer whose broker is at another firm, the rule says to present the offer to the other consumer's broker if there is an unexpired listing (Rule 6.13).
Step 2: the counterproposal
A seller who likes some terms but not others does not say yes or no. They send back a counterproposal (a written reply changing some terms, using the Commission's form). A counterproposal is both a rejection of the old offer and a new offer. The buyer can accept it, reject it or counter again. Each round must be in writing and signed, and every later change to the money terms must be in an amendment (Rule 6.14.A.1). Maya keeps every version in the transaction file.
Step 3: keep secrets while negotiating
Maya uses the confidentiality rules at every step. As seller's agent she may not disclose without informed consent that the seller will take less, why the seller is selling, or that the seller would take other financing terms (C.R.S. 12-10-404(2)). On the buyer side the mirror image applies (C.R.S. 12-10-405(2)). A transaction-broker must keep both sets of secrets (C.R.S. 12-10-407(3)). The firm's Office Policy Manual must also set procedures to protect this information (Rule 6.4.B.4). The statute does not say whether the content of competing offers may be shared. Follow the seller's written instructions and the firm's manual, and never reveal one buyer's confidential data (such as the buyer's maximum) to another.
Step 4: the multiple-offer scenario
Dana and Leo want to net the most money with the least risk. Every cost other than commission and concessions is the same for every offer: payoff $310,000 + title $1,800 + tax proration $1,686 + closing fee $300 + HOA fees $600 = $314,386. The fee total is 5% of the price (2.5% to each side).
| Offer | Price | Terms | Fees (5%) | Seller concession | Net to seller |
|---|---|---|---|---|---|
| A | $585,000 | 96.5% loan, appraisal risk higher | $29,250 | $10,000 | $231,364 |
| B | $578,000 | 80% loan, no concession, pre-approved | $28,900 | $0 | $234,714 |
| C | $595,000 | 85% loan, buyer must first sell own home | $29,750 | $15,000 | $235,864 |
The math, line by line. Offer A: $585,000 - $29,250 = $555,750; - $10,000 = $545,750; - $314,386 = $231,364. Offer B: $578,000 - $28,900 = $549,100; - $314,386 = $234,714. Offer C: $595,000 - $29,750 = $565,250; - $15,000 = $550,250; - $314,386 = $235,864.
Look at the result. A has the second highest price among A and B, but has the lowest net. C has the highest price and the highest net but carries a home-sale contingency (a condition that the buyer must first sell their own house), which is a real risk that the deal collapses. B has the second best net, the best certainty. Maya shows the table, gives her honest view of the risk, and the sellers decide. She cannot decide for them.
Step 5: escalation clauses
An escalation clause is a term in an offer saying, "I will pay a set amount above any higher offer, up to a cap." Example: Buyer D offers $578,000, escalating $3,000 above the best competing offer, capped at $590,000. If the best competing offer is $585,000, D's price rises to $588,000. If the best is $595,000, D would need $598,000 but the cap is $590,000, so D falls out. Maya, as the seller's agent, tells her sellers that a clause requires them to show proof of the competing offer, and that the sellers decide whether to share the competing price at all. She does not reveal one buyer's confidential motives to another.
Step 6: appraisal gap
A lender will lend on the lower of the price and the appraised value. An appraisal gap clause is a buyer's promise to pay cash for some or all of the shortfall if the appraisal comes in low. Suppose Offer B ($578,000, 80% loan) appraises at $570,000. The planned loan is $578,000 x 0.80 = $462,400, but the lender lends only $570,000 x 0.80 = $456,000. The loan is $6,400 short. With a gap clause covering up to $8,000, the buyer brings $6,400 more in cash and the deal stays alive. Without the clause the buyer may ask to renegotiate, using the Appraisal section of the contract, or terminate by its deadline.
Step 7: respond, in writing
Maya sends the sellers' answer to each buyer's broker. A typical plan: accept B, send a "backup" notice to C only if the sellers want a backup, and decline A. The contract is formed only when the acceptance is signed and delivered according to the contract's terms.
Example with real numbers
If the sellers choose B at $578,000, they net $234,714. If the appraisal comes in at $570,000 and B's buyer covers the $6,400 gap, the price is still $578,000 and the net is unchanged. If the buyer instead negotiates the price down to $570,000, fees fall to $28,500 and the net is $570,000 - $28,500 - $314,386 = $227,114, which is $7,600 less. This shows why the gap clause matters to sellers.
Law cited
- C.R.S. 12-10-404(1)(c)(II)
- C.R.S. 12-10-404(2)
- C.R.S. 12-10-405(1)-(2)
- C.R.S. 12-10-407(2)(b)(I)
- C.R.S. 12-10-407(3)
- 4 CCR 725-1 Rule 6.4.B.4
- 4 CCR 725-1 Rule 6.13
- 4 CCR 725-1 Rule 6.14.A
Key terms
- Counterproposal
- A written reply that changes some terms of an offer; it rejects the old offer and creates a new one.
- Multiple offers
- Two or more offers on a property at the same time.
- Net to seller
- The cash the seller keeps after fees, loan payoff, concessions and costs.
- Escalation clause
- An offer term to pay a set amount above any higher offer, up to a stated cap.
- Cap
- The most an escalation clause allows the buyer to pay.
- Appraised value
- The value a licensed appraiser reports; a lender lends on the lower of price or value.
- Appraisal gap
- The difference between the contract price and a lower appraised value.
- Appraisal gap clause
- A buyer's promise to cover some or all of an appraisal shortfall in cash.
- Home-sale contingency
- A condition that the buyer must first sell their own home.
- Confidential information
- Facts a broker may not reveal without informed consent, such as the seller's lowest price.
- Backup offer
- An accepted position behind the primary contract that takes effect if the first falls through.
Flashcards
Does a seller's agent have to present all offers, even a low one?
Yes, in a timely manner (C.R.S. 12-10-404(1)(c)(II)).
Even when the property is under contract?
Yes, offers must still be presented (C.R.S. 12-10-404(1)(c)(II)).
Transaction-broker offer duty
Present all offers and counteroffers timely (C.R.S. 12-10-407(2)(b)(I)).
What is a counterproposal?
A reply that rejects the old offer and makes a new one with changed terms.
Escalation example
$578,000 + $3,000 over best, cap $590,000: beats $585,000 at $588,000.
Appraisal gap math
Loan = LTV x lower of price or value; gap = planned loan - actual loan.
Which offer wins on net?
Compare fees, concessions and costs, not just price.
Can a seller's agent tell a buyer the seller will take less?
Not without the seller's informed consent (C.R.S. 12-10-404(2)(a)).
Who decides which offer to accept?
The seller, never the broker.
Quiz: 10 questions
Tap an answer. It shows right or wrong and opens the reason. Your score is saved in this browser and counts in the study app.
A seller's agent receives a very low offer. What must she do?
- A Present it timely to the seller
- B Hold it until a better one arrives
- C Tell the buyer it is rejected
- D Present it only if the buyer is pre-approved
Show answer and why
Answer: A. Present it timely to the seller
All offers must be presented in a timely manner. The agent may not filter on her own opinion.
C.R.S. 12-10-404(1)(c)(II)
The home is already under contract and a new offer comes in. What must the seller's agent do?
- A Refuse it
- B Present it to the seller anyway
- C Wait until closing
- D Cancel the first contract
Show answer and why
Answer: B. Present it to the seller anyway
The duty to present offers applies regardless of whether the property is under contract. It does not cancel anything.
C.R.S. 12-10-404(1)(c)(II)
Using the table, what is Offer B's net to seller?
- A $231,364
- B $235,864
- C $234,714
- D $249,100
Show answer and why
Answer: C. $234,714
578,000 - 28,900 = 549,100; 549,100 - 314,386 = 234,714.
General net sheet math
Which choice is a counterproposal?
- A A reply that changes terms and so also rejects the prior offer
- B An acceptance of all terms
- C A listing extension
- D A home inspection report
Show answer and why
Answer: A. A reply that changes terms and so also rejects the prior offer
A counterproposal is a rejection of the old offer plus a new offer. Acceptance of all terms is just acceptance.
General contract law
Escalation: $578,000, plus $3,000 over the best competing offer, cap $590,000. The best competing offer is $585,000. What does the buyer pay?
- A $578,000
- B $585,000
- C $588,000
- D $590,000
Show answer and why
Answer: C. $588,000
585,000 + 3,000 = 588,000, below the cap. $590,000 is only the ceiling.
General escalation practice
Offer B is $578,000, 80% loan, appraisal $570,000. How much less will the lender lend than planned?
- A $8,000
- B $6,400
- C $462,400
- D $0
Show answer and why
Answer: B. $6,400
Planned loan 578,000 x 0.80 = 462,400; actual 570,000 x 0.80 = 456,000; difference 6,400. The $8,000 is the price-to-value gap, not the loan gap.
General lending practice
Which information may a seller's agent NOT reveal to a buyer without the seller's informed consent?
- A The seller's motivating factors
- B The year the house was built
- C The lot size
- D The listing price
Show answer and why
Answer: A. The seller's motivating factors
Motivating factors are protected. The other items are public or already disclosed.
C.R.S. 12-10-404(2)(b)
A transaction-broker has both buyer and seller as parties. Which statement about secrets is correct?
- A She may share both sides' maximum and minimum
- B She must keep each side's price secrets without informed consent of all parties
- C She need keep secrets only for the seller
- D She may share only the buyer's secrets
Show answer and why
Answer: B. She must keep each side's price secrets without informed consent of all parties
A transaction-broker may not disclose either party's confidential price information without all parties' informed consent.
C.R.S. 12-10-407(3)
Which offer in the table has the highest price?
- A Offer B
- B Offer A
- C They are equal
- D Offer C
Show answer and why
Answer: D. Offer C
C at $595,000 beats A $585,000 and B $578,000. Highest price is not always best net or best risk.
General
Sellers want to choose by the lowest risk. Based on the table and the home-sale contingency, which is the better fit?
- A Offer A because of its price
- B Offer C because of its price
- C Offer B, since it has a stronger buyer and second-best net
- D Whichever came in first
Show answer and why
Answer: C. Offer B, since it has a stronger buyer and second-best net
B is pre-approved, has no concession and no home-sale contingency; C's higher net depends on a buyer selling a house. The sellers decide.
C.R.S. 12-10-404(1)(c)(I), (IV)
← Working with a buyer and writing an offer with real numbersFrom contract to closing: the deadline calendar →