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Always Counter the First Offer in a Negotiation

Empty Conference RoomOne of the most frequent questions I am asked is, “Should I counter or should I accept the first offer?” This is usually followed by, “I don’t want to jinx my deal by countering when I felt the original offer was acceptable.”

As a general rule, you should never accept the first offer. Why? People expect you to counter and I believe you should not disappoint them. When you don’t counter the original offer, you leave your counterpart with two bad thoughts: they should have made an even better first round offer, and there must be something wrong with your willingness to agree so quickly.

Let’s say that I’m selling my used 2008 Ford F150 King Ranch pick up for $21,000. You come by to look at my truck, take it for a test drive and then return, saying, “Your truck is in excellent condition and I am comfortable with the $21,000 price. Would you prefer a cashier’s check or all cash?” Now you have left me with the terrible thought that I priced my truck too low and I now think I could have easily gotten more from you. On top of this, I may be suspicious about you wanting to finalize the deal so quickly.

You don’t want your counterpart leaving the negotiation feeling this way, especially if you may negotiate with them in the future. To create a win-win outcome, you need to counter, however small.

By definition, a counter offer is an offer made in response to a previous offer, statement, or condition of a proposed product or service. It’s important to remember that, once you counter, the person making the offer is no longer legally responsible for honoring their initial offer. That means in our deal on my truck, when you counter back with an offer of $18,500, I am no longer legally responsible to sell you my truck, even at $21,000. I could counter back $22,500 which might be a great counter, even higher than my original selling price.

Now, let’s go back to our original question: should you still counter when you feel that the original offer is acceptable? Yes, and here are 5 important tips on how to do so:

  1. Know your facts: If you want to buy my truck, you had better know the Kelly Blue Book and Edmonds.com value at the Excellent, Good, Fair and Poor levels. If you don’t know the facts, you might counter at 10 percent less than the asking price, obtain agreement and still get a rotten deal.

  2. Set a goal: When you know your facts, you can establish your goal, your wish, and the bottom line of what would be an acceptable counter offer. If your wish is to save 20%, you might counter the $21,000 asking price by making an offer of $16,800.

  3. Set a time limit: When you counter, especially by email, there may be delays in your counterpart getting back to you. I suggest setting a time limit that you can live with that would look something like this, “I am happy to pay you $18,000 for your truck. But, I am going to keep looking at other trucks and my offer will expire in 48 hours.” Putting a time frame into the counter will make me, the seller, feel a sense of urgency.

  4. Use Your Power: The side least committed to the relationship holds the most power. This means that you want my truck, but you don’t want or need it that badly because you know that there will always be another truck to buy. For me, the seller, I want to sell my truck to you, but I’m not desperate enough to sell it at the low price of $18,000 because I know that here will always be another buyer to come along.

  5. Be creative: What if my truck is reasonably priced or maybe even priced below the Kelly Blue Book suggestion? This is where you, the buyer, can get creative and counter options other than price. Some of the other negotiable issues besides price may include:

    • Repairs
    • Color or features
    • Time
    • Payment terms
    • Warranty
    • Service or service records

In summary, even when you feel that you have received a fair initial offer, starting the negotiation off with countering the first offer will increase the chances that both you and your counterpart will feel that the negotiation was a success.

What’s your experience with countering, or not countering, the first offer?

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