Negotiating an Offer

Add a Deadline

In an aggressive market, it can sometimes help to add in an offer deadline. This pushes the seller to accept your offer instead of continuing to show the property. However, this can backfire, depending on the type of sellers. Here are 2 types of common deadlines:

1. Example A: “Our client kindly requests a response by 12:00pm tomorrow.”

2. Example B: “If accepted tonight, our client is willing to pay $X for this property. However, if we do not sign off tonight, our client’s offer will be $Y (lower number).

Adjust Pricing

• Higher price: You can increase your purchase price. 

• Escalation clause: This allows you to boost your offer above the highest offer up to your maximum number. For instance, you can offer $300,000 with a $1,000 escalation not to exceed $320,000. If the second highest offer the sellers receive comes in at $310,000 and the sellers use your escalation clause, you win the bid and pay $311,000.

  • Note that sometimes sellers will reject escalation clauses due to multiple escalation clauses OR because they know you will drop the clause and instead offer your max price (i.e. they saw your cards).

  • Additionally, please keep in mind that your base offer (the $300,000 in this example) should be strong on its own. We have encountered situations in which sellers will receive too many escalation clauses and simply choose the highest base offer instead of using the clauses at all. 

  • You do not have to put a cap on the clause if you’d rather leave it “unlimited,” but be careful with this strategy!

  • You can also escalate more than $1,000. We’ve seen $2,000, $5,000, etc. 

  • These clauses are very handy, but they are not perfect! There are certain occasions where it makes more sense to just put forth a very strong price to show your commitment to the property. Please understand the pros and cons before deciding to use one.

• Increase earnest money: You can offer 5% of the price in earnest money or more. You can also propose your first round of earnest money be nonrefundable, meaning you would not be able to retain it if you cancel the contract for any reason during attorney review. 

• Increase down payment: You can increase your down payment amount. Please speak with your lender to see if this is an option.

Adjust Closing Date

• Closing date: You can agree to close on the exact date that the sellers want to close.

• Rent-free leaseback: If the sellers have not found a property yet, or need more time to close on their new home, you can sweeten your offer by allowing the sellers to rent back from you post-closing for $0. 

Waive Contingencies

Waiving contingencies is another option to make your offer stand out. Keep in mind that contingencies are in place for YOUR protection, so waiving them can lead to risk. You will want to make sure you are comfortable with that amount of risk!

• Purchase in “as-is” condition: You can agree to purchase the home “as-is.” With this provision, the seller does not make any representations as to the condition of the home, and if a system fails at any time, including after closing, you do not have recourse against the seller. 

• Waive inspection contingency: You can waive your inspection. For most properties, we usually do not recommend this, since agreeing to conduct the inspection with no requests (see below) provides similar peace of mind to the sellers but provides the buyer with more protection. 

• Agree to inspection with no requests: The provision still allows you to perform your inspection, but you agree to refrain from asking for any credits or repairs afterwards. This still gives you a chance to back out if the inspection reveals dealbreakers.

• Waive mortgage contingency: You can waive your financing contingency even if you are intending on getting a mortgage. We do not recommend this. If you were to waive your financing contingency and your loan falls through, you would either forfeit your entire earnest money deposit (first and second rounds) OR need to have a back-up plan to purchase the property with all cash.

• Shorten mortgage contingency: You can shorten your mortgage contingency. For example, if you have a longer close, you can shorten the contingency from 45 days to 30 days. Please speak with your lender to see if this is an option.

• Waive appraisal contingency: You can waive your appraisal contingency, if your lender needs to order an appraisal for your loan. You can learn more here about appraisals.

  • Appraisal rider: One strategy to limit your exposure with regards to the appraisal is to add an appraisal rider. With an appraisal rider, you will agree to pay the difference between the purchase price and the appraised value. You can optionally define the maximum amount you will pay (option B on the rider) – i.e. you will only cover the difference if it is less than $20,000.

Get Creative

• Letter to seller: If you haven’t written one already, this can go a long way in winning over the hearts of sellers! Tell the seller what you love about their home.

• Meaningful offer price: Look around the property for a number that might have some meaning for the seller. Maybe it’s their address. Maybe it’s a wedding anniversary. Tie that number into your offer price, and we’ll explain the “why” behind your price in our offer package. (For example, the home address is 123 Willow Lane; offer $950,123 as your price.)

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