What is a counteroffer
A counteroffer is a reply that rejects an initial proposal and substitutes a new set of terms for the other party to consider. It ends the original offer and gives the other side three choices: accept the counteroffer, refuse it, or return another counteroffer. Counteroffers appear in many contexts — real estate, employment, vehicle sales, mergers and acquisitions, and other commercial negotiations.
Key features to remember
– A counteroffer cancels the prior offer. Once you counter, the original offer is generally no longer available for acceptance.
– Acceptance of the counteroffer (without further changes) creates a binding agreement.
– Counteroffers are usually conditional: they change one or more terms (price, timing, scope, contingencies).
– Parties can counter back and forth indefinitely; there is no fixed limit on rounds of negotiation.
– Emotions can cloud judgment—good negotiations rely on facts, questions, and time to evaluate options.
How counteroffers work (step-by-step)
1. One party makes an offer (e.g., price, timeline, or contract language).
2. The recipient rejects the original offer and proposes different terms — this is the counteroffer.
3. The original offeror evaluates the counteroffer and either: accepts it (binding contract formed), rejects it, or issues another counteroffer.
4. If parties agree on identical terms, they finalize the deal. If they cannot agree, no contract exists.
Terms commonly changed in counteroffers
– Price or salary
– Deadlines and delivery dates
– Scope of work or included items
– Contingencies (e.g., financing, inspections)
– Contractual protections (warranties, indemnities)
Practical tips for negotiating counteroffers
– Do your research: know market benchmarks (comparable home sales, salary ranges, car values).
– Ask clarifying questions about the other party’s priorities and constraints.
– Ask for time to review any counteroffer rather than responding under pressure.
– Keep communications professional and document changes in writing.
– Consider walk-away terms in advance (your minimum acceptable price or deal terms).
Responding to an employment counteroffer
Common responses include:
– Accepting the counteroffer if it meets your goals.
– Rejecting and reiterating your original terms if you decide to “stand firm.”
– Proposing a compromise (meeting halfway).
When you receive a counteroffer from your current employer after you’ve accepted another job, weigh non‑financial factors too: trust, long-term prospects, and whether underlying reasons for seeking a new job remain unresolved.
How to reject a counteroffer
– Be polite and direct.
– State the decision in writing if the negotiation was in writing.
– Briefly explain your reason if appropriate (e.g., “I have accepted another offer that better matches my long‑term goals”).
– Avoid burning bridges: maintain professionalism to preserve future relationships.
Checklist: Before you respond to a counteroffer
– [ ] Verify the market data that supports your position (sales comps, salary surveys, valuation).
– [ ] Identify your BATNA (best alternative to a negotiated agreement) — what will you do if negotiations fail.
– [ ] Decide your reservation point (minimum acceptable outcome).
– [ ] Determine whether you need time to consult others (advisor, attorney, mentor).
– [ ] Confirm how changes will be documented (written amendment, new contract).
– [ ] Prepare a clear, unemotional response strategy (accept, reject, or counter).
Worked numeric examples
Example 1 — House sale
– Seller lists home at $300,000.
– Buyer offers $285,000 (offer rejected).
– Seller returns a counteroffer at $295,000.
If the buyer accepts $295,000, the parties have a binding agreement at that price. If the buyer instead counters at $290,000, the negotiation continues.
Example 2 — Car negotiation
– Seller asks $20,000 for a car.
– Buyer offers $15,000.
– Seller counters at $16,000.
If the buyer refuses $16,000, neither side can force a sale at $15,000.
Example 3 — Salary percentages converted to dollar amounts
– Current salary: $60,000.
– New company offers 10% higher pay = 60,000 × 1.10 = $66,000.
– You ask your current employer for 20% = 60,000 × 1.20 = $72,000.
– Employer counters at 15% = 60,000 × 1.15 = $69,000 and offers one additional week off.
You must decide if $69,000 plus benefits equals or exceeds your priorities and alternatives.
When you should (and shouldn’t) accept
Accept a counteroffer when it satisfies your objectives, is documented in writing, and you have confidence in the other party’s ability and intent to follow through. Be cautious if the counteroffer addresses only a short-term issue while underlying problems remain (for example, poor management or unsustainable role expectations).
Selected references for further reading
– Invest
oped ia — Counteroffer definition and examples
https://www.investopedia.com/terms/c/counteroffer.asp
Society for Human Resource Management (SHRM) — Handling counteroffers and employer best practices
https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/didyougetacounteroffer.aspx
Harvard Business Review — When you should take a counteroffer — and when you shouldn’t
https://hbr.org/2014/07/when-you-should-take-a-counteroffer-and-when-you-shouldnt
The Balance Careers — How to handle a counteroffer from your employer
https://www.thebalancecareers.com/handling-a-counteroffer-2060352
U.S. Bureau of Labor Statistics (BLS) — Wages by occupation and related compensation data
https://www.bls.gov/cps/
How to use these sources
– Use Investopedia and The Balance for practical, step-by-step negotiation and checklist-style guidance.
– Use SHRM for employer-side policies and HR considerations (documentation, timelines, company processes).
– Use HBR for behavioral research on why counteroffers often fail to solve deeper problems.
– Use BLS to benchmark salary, benefits, and labor-market context for your role and region.
Educational disclaimer
This information is for educational purposes only and is not individualized legal, tax, or employment advice. Consult qualified professionals (HR, an employment attorney, or a financial advisor) before making decisions based on counteroffers.