What Is a Counteroffer? (With Definition and Examples)

By Indeed Editorial Team

Published 23 August 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Counteroffers are an important element of negotiation procedures. Whether you're making or receiving the counteroffer, it's essential that you understand how the process works. Learning about counteroffers and how to navigate them can better prepare you to gain the most benefit from a transaction. In this article, we discuss what is a counteroffer, review the pros and cons, explore how to make a proper counteroffer, examine the necessary skills to benefit from a counteroffer process and look at a few examples of counteroffers.

What is a counteroffer?

To understand what is a counteroffer, it starts with an alternative proposition that you make to pay for something after you decline the initial offer that someone presented to you. When you make a successful counteroffer, you can generally get an item or service at a lower price range that fits within or closer to your budget. Making a counteroffer can be a challenging task because one party usually wants to pay less for an item, while the other wants to receive more for it. This process requires a proper balance of negotiation, critical analysis and communication skills so that both parties come to an agreement.

There are three steps to the counteroffer process, including:

Accepting the counteroffer

When someone makes a counteroffer, the first action you can do is accept it. Accepting the first counteroffer indicates that you're satisfied with the proposition, or at least willing to approve of it. Whatever your reasons for accepting it, it's generally improper to make further adjustments to the arrangement, since you and the other party have come to a formal agreement. Suddenly changing your counteroffer after you both have already agreed on it can dissuade the other person and prompt them to cancel the transaction completely. Make certain you're content with the counteroffer before approving the final proposal.

Rejecting the counteroffer

If you don't accept the counteroffer, the second action you can do is simply reject it. Rejecting a counteroffer demonstrates that you're dissatisfied with the proposition that they brought to you. This either means that you want more in the proposal or you feel as though the counteroffer was not appropriate for the item or service on offer. However, it's important to be mindful that rejecting a counteroffer sends a strong message of disapproval and the other person may withdraw from the transaction. If you're certain that you want to reject it, follow up immediately with a new offer.

Making another offer

If you decide to reject the offer, then you can either exit from the transaction all together or make a new offer that is more befitting to what you want. When you make another offer after rejecting the initial offer, you can try to find some common ground between all involved parties. The primary purpose is to complete the transaction, and stalling on a new offer may not be conducive to a final sale. Try to make an offer that you approve of, but that you believe the other party is also going to be fine with as well.

The pros of making a counteroffer

Here are some pros to making a counteroffer:

  • You can make more money: As the seller, if the other party approves your counteroffer, you may be able to get more money for your item than if you had accepted their first offer.

  • You can pay less money: As the buyer, you may be able to save money and pay less for an item or service than what they originally offered it to you for.

  • You can prepare for future transactions: Depending on the context of the transaction, you may be able to use the same counteroffer tactics to make similar beneficial offers for future business matters.

  • You gain value: You can use your counteroffering experience to improve your sales and negotiation skills.

Related: Sales vs. Business Development: What's the Difference?

The cons of making a counteroffer

Here are some of the cons of making a counteroffer

  • The other party may reject it: Naturally, the other person may reject your counteroffer, which means you may rethink how to approach the transaction, so they're more likely to accept what you're willing to pay.

  • The other party may cancel the transaction: If the other party becomes dissatisfied with too many counteroffers, then they may cancel the transaction and look for someone else who is willing to buy at their asking or initial counteroffer price.

  • The sale process is slower: Depending on how quickly you complete the transaction, making counteroffers repeatedly with the other party can delay the sale.

  • You may make less money: If you are the seller, you can potentially make less money if you accept a counteroffer below your asking price, which can also cause your item or service to drop in value.

How to make a proper counteroffer in 4 steps

Follow these four steps to help you make a successful counteroffer:

1. Review the initial offer

The first thing to do is review the initial offer to identify if it's a price you want to pay. If it is, then you can accept the offer and continue on with other matters. However, you may have a set budget and sometimes the asking price needs to be negotiated down.

2. Compare the initial offer with similar purchases

Once you have decided that you want to make a counteroffer, look at similar items for sale on online marketplaces and make a comparison. Identify how much other people are selling their items for. You might also use websites that help you identify the average price for an item.

3. Determine if the offer is reasonable

After you have made some comparisons between the item price and how much it normally sells for on online marketplaces, it can be easier for you to determine a counteroffer price. Consider if their price is reasonable or not. You may discover that after doing some research that the item is being sold at a fair price.

4. Provide a modestly lower counteroffer

Think of a price that you are content with paying and that the seller is likely to accept. Also consider that the seller is generally going to provide a slightly higher counteroffer to your first counteroffer. Their priority is making the most money from their item. For example, if the seller offers an item for $20, you could counteroffer with $10. The expectation is that the seller is most likely to counteroffer with $15.

Important skills to make a counteroffer

These are some of the most essential skills for making a counteroffer:

Negotiation

Whether you're selling or buying, the ideal situation is that you complete the counteroffer having earned or saved more money. Being able to negotiate properly allows you to convince the other person that your counteroffer is beneficial to them. You may even persuade them to believe that your counteroffer is the best offer they are likely to receive, which can prompt them to accept it out of concern that they might miss out on this great opportunity.

Related: Hard Skills Vs. Soft Skills: Definitions and Examples

Critical analysis

Critical analysis refers to your ability to analyse and understand the context of the other person and why they might be selling their item at their original asking price. For example, you see on an ad that someone is selling a couch and they need it gone immediately because they're moving the next day. You may be able to use that information to counteroffer for a much lower price because they may be willing to accept it in their urgency to sell as soon as possible.

Related: What Are Analytical Skills and Why Are They Important For Employment?

Communication

Communication skills are essential for communicating with the other party in a way that is cordial. A respectful and friendly tone may help to make them more receptive to your proposition. How you communicate with others can often determine how they talk about to you.

Related: How To Improve Communication Skills (With Definition and Examples)

Counteroffer examples

Here are a few samples of counteroffers:

Making a counteroffer

Choon is selling a vintage porcelain doll on behalf of his grandmother, which he claims is worth hundreds of dollars. He is selling it to you for $100.

Example: "That is a good price for such a valuable doll, but it is slightly out of my budget. Plus, there is a chip on the doll's right hand. Because of the blemish, how about $80?"

Accepting a counteroffer

Huimin has a rug that she recently bought from an online store, but realised that she got the wrong size and the store has a no return policy. It cost $125 and Huimin wants to sell it for the same price since she didn't use it and it's still packaged. She puts it on a consumer to consumer ecommerce marketplace and someone counteroffers for $100.

Example: "Okay. If you want the rug for $100 I accept, but you have to come pick it up today, otherwise the price goes up by $10 tomorrow."

Rejecting a counteroffer

Tee notices an ad for rare baseball cards selling for $1,000. People predict the cards are going to be worth a lot more in the next few decades. Tee doesn't want to pay $1,000, so he counteroffers with $500.

Example: "Hi Tee. Thank you for showing interest in the baseball cards, but I am going to have to reject your offer at this time."

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