Subject Offer

What Is a Subject Offer?

A subject offer is a financial term related to a potential transaction or deal as part of a negotiation for sale. This offer does not represent a firm commitment to sell but is subject to receipt of a counteroffer, which may later be followed by a sale. Essentially, the offer is "subject to" certain terms or considerations.

Sellers use subject offers to gather information on their assets or to aid in the process of price discovery. Rather than placing an asset immediately into the market for sale, a subject offer enables sellers to assess demand.

Key Takeaways:

  • A subject offer is a potential offer to effect a transaction that relies on certain information, terms, or conditions being established before the sale can proceed.
  • Sellers use subject offers to obtain information like demand in the market or to hold their offer in reserve in case they decide to amend or retract it.
  • Subject offers are commonly used in the bargaining process of a transaction to illicit a counteroffer.

Understanding a Subject Offer

A subject offer is an offer to sell an asset but the seller is not committed to the transaction. That is, the seller may withdraw the subject offer at any time. In some instances, individuals use subject offers to elicit a counteroffer from a willing buyer.

Subject offers are commonly used in the bargaining process of a transaction. An offer itself is a conditional proposal made by a buyer or seller to buy or sell an asset, which becomes legally enforceable if accepted. A subject offer is one of many different types of offers, and each has a distinct combination of features ranging from pricing requirements, rules and regulations, type of asset, and the buyer's and the seller's motives.

Subject Offer vs. Counteroffer

A subject offer does not, by definition, necessarily depend on a counteroffer, but subject offers often elicit a counteroffer. A counteroffer is a proposal made as a result of another offer. A counteroffer revises the initial offer and makes it more desirable for the buyer or seller. This type of offer permits a person to decline a previous offer, and if the original offer came without any formal commitment, it is known as a subject offer. Both subject offers and counteroffers are important parts of the negotiation process.

When participating in negotiations, two parties participate to find mutually acceptable terms. In the case of selling a house, a seller might entertain subject offers in the hope of receiving higher counteroffers.

But there is more to a counteroffer than the price alone. There are several forms of a counteroffer, such as a seller’s acknowledgment of an order that provides estimated delivery dates.

The Offer Process

After receiving a counteroffer on their home in response to the subject offer, the seller of the home can offer a counteroffer to the buyer's counteroffer, and so on.

The buyer has three options when responding to a counteroffer: accept it, reject it, or present another counteroffer. If the buyer rejects the offer but later changes their mind and wants to accept it, the offeror cannot accept the offer. The offeree must present a new counteroffer. There is no limit to the number of times an offeree and offeror can counter each other during negotiations.