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,” which still allows you to perform your inspection, but you agree that you will refrain from asking for any credits or fixes afterwards. This still gives you a chance to back out if the inspection reveals dealbreakers.

• Waive inspection contingency: You can waive your inspection. For most properties, we usually do not recommend this, since as-is provides similar peace of mind to the sellers but provides the buyer with more protection. 

• 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. You will agree to pay a certain dollar amount between your price and the appraised value, should the property not appraise out. We recommend a 2-step appraisal agreement. This is less aggressive than waiving your appraisal completely, but there is still risk!

    • Example: “Should the appraisal come in between $475,000 and $500,000, Buyer agrees to pay the difference, and the purchase price shall remain at $500,000. Should the appraisal come in below $475,000, Buyer shall have the unilateral right to renegotiate the sale price with the Seller, and if an agreement cannot be reached after reasonable attempts have been made, either party can cancel the transaction.”

Write a Letter to Seller

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

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