Once a buyer is interested in purchasing your home, their agent will help them write up a Purchase Agreement (PA). This PA will consist of the purchase contact along with any addendums, and sellers disclosure, and a couple of other supplemental documents. The total length of the standard purchase agreement today is about 30 pages including the sellers disclosure. Along with the purchase agreement, we would expect to receive a Pre-Approval from the buyer's mortgage company, along with a copy of the earnest money.
The Purchase Agreement document and all of the various addenda is a set of standard “fill-in-the-blank” forms created by the Minnesota Association of Realtors, in conjunction with lawyers.  The document is actually very easy to understand and you should familiarize yourself with it before it comes time to review an offer.
After we receive an offer, we can discuss the terms and start negotiations. You basically have 3 options to respond to the offer:
Accept - Accept the terms the way they are written
Counter - Modify some of the terms and get back to the buyer
Reject - let them know that this isn't close enough to even consider countering the offer
If the offer is way too low,I almost always recommend not rejecting an offer, but countering at full price.

Real Life Example:

I had listed a home for sale at $279,900 and we received an offer at $230,000. This was obviously way too low. We countered at full price and the buyer came up to $270,000. We countered again at $275,000 and the buyer accepted it.

Otherwise for countering, we can counter on almost every term that is in the purchase agreement. Most of the time, we end up countering on price, or closing date, or seller's contributions, or days for inspections. If the difference in price is too large, we may not come to an agreement. Otherwise things can usually work out between buyers and sellers creating the "win-win" situation.

Timeline for response

Once you have received a purchase agreement, usually we want to try to get back to the buyer within a few hours. This is because within this timeframe, the buyer is still on their natural "high" from making an offer on a house. If we wait too long, say the next day or the next evening, they will have "cooled off" a bit as well as they may get frustrated and withdraw their offer. I know "within a few hours" is vague, but every situation is different. If you as the seller need to consult with other family members to sell the house, then we usually let the buyer know that you are not shopping their offer around, and that it is a joint decision with family members in different locations.

Once we respond, the buyer usually will respond pretty quickly, maybe within 30 minutes or so. After that, any other back and forth usually happens within minutes, with the final signatures being executed very shortly thereafter.

The whole process can be 3 to 4 hours, or even overnight. Sometimes a seller needs to sleep on it, or sometimes a buyer needs to sleep on it. But almost always things are wrapped up within 24 hours. This is, of course, not necessarily the case with foreclosures or short sales.

Additional Resources:

Sample Documents (password protected, contact Steven Hong for access)
Homebuying 101: Pre-Qualified vs Pre-Approval: What's The Difference?

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