You can't negotiate a deal to buy a home if you don't know the rules. Understanding offers and counteroffers in home buying can save you time and money. Not understanding the process can cost you money and could possibly cause you to lose out on the purchase.

Here are some important tips for understanding offers and counteroffers.

You draw up the proposed deal and send it to the seller. At this point, it is only an offer. There is no binding legality until the seller acts on it in writing.

Once the seller has received your offer for the purchase of his property, the ball is in his court. He has options. He may accept your offer as written, in which case, that offer now becomes an enforceable CONTRACT, or he may he send it back to you with provisions making it a COUNTEROFFER. Any part of the offer that he changes creates a counteroffer situation. All changes or acceptance must be in writing to be enforceable.

Any change the seller made in writing in response to your offer, invalidates your offer and requires a response from you. You now have the option to accept his counteroffer, propose a new counteroffer, or walk away from the deal. If you sign the contract form without making any changes, then you have accepted his counteroffer and you are now under contract. If you make further changes and send it back, you have to make a counteroffer to the buyer's counteroffer.

It is not unusual for an offer to go back and forth several times before a contract status has been reached. The person making the last change(s) on the offer is the one who is bound to those specific terms. For this reason it can be prudent to stipulate a time of invalidation, especially in a strong market, i.e., offer valid until (a specified time). You don't want to be bound to an offer you made while he holds out without responding, hoping to get a better deal from someone else.

You may send written notification that you are withdrawing your offer. As long as it reaches him BEFORE he ACCEPTS your offer, you may walk away from the deal. The time of his receipt of your intent to withdraw should be documented by messenger, fax, email records or postal confirmation.

An offer is typically made with legal tender-money. This is submitted in the form of an earnest money check, an amount that shows the seller your good intentions to purchase. The money is usually held in escrow until the closing date. If no contract status is reached, the earnest money is returned to the buyer.

Negotiation back and forth between buyer and seller is more the rule than the exception in real estate transactions. It can get confusing and if you're not careful, you might end up agreeing to something you didn't intend.

The best advice in the buying and selling of real estate is to use a real estate professional for your transactions. They are trained negotiators and can help you understand the process of offer and counteroffer.