What Is a Retrade in Real Estate?

Real estate transactions involve a detailed journey with numerous steps and agreements between buyers and sellers. This process is often complex, requiring careful coordination and adherence to various contractual obligations. From the initial property search to the final closing, many stages must be successfully navigated for a transaction to reach completion.

What is a Retrade

A “retrade” in real estate refers to a request by one party, typically the buyer, to renegotiate the previously agreed-upon terms of a property deal. This often involves a change to the purchase price or other significant conditions. This request usually occurs after a binding agreement, such as a purchase agreement or sales contract, has been signed but before the transaction officially closes. It represents an attempt to modify the existing contract based on new information or unforeseen issues that have come to light. While sellers may view a retrade negatively, perceiving it as a tactic to force a lower price, buyers often consider it a necessary step. It allows them to avoid overpaying or assuming unforeseen risks discovered after the initial offer was accepted. The practice can lead to mistrust or even cause a deal to fall apart if new terms cannot be mutually agreed upon.

Common Causes of Retrades

Retrade requests frequently arise from issues discovered during the buyer’s due diligence period. One common cause is significant findings from property inspections, which might reveal major structural defects or the need for costly repairs to essential systems like heating, ventilation, and air conditioning (HVAC), plumbing, or electrical. Another frequent trigger for a retrade is an appraisal issue, where the property’s appraised value comes in lower than the agreed-upon purchase price. Lenders typically base their loan amounts on the appraised value, creating a gap between the loan and the agreed price that the buyer would need to cover out-of-pocket. Additionally, unexpected environmental concerns, undisclosed title defects, or discrepancies in property square footage can prompt a buyer to seek a renegotiation.

When Retrades Typically Occur

Retrades most commonly occur after the initial offer has been accepted and the purchase contract has been signed, but before the final closing of the transaction. This critical window allows the buyer to conduct thorough investigations of the property. Key stages where a retrade might be initiated include the inspection period, when detailed assessments of the property’s physical condition are performed. The appraisal contingency period is another common time, particularly if the property’s valuation by an independent appraiser falls short of the agreed-upon sale price. Furthermore, issues uncovered during the title review process, such as undisclosed liens or ownership disputes, can also lead to a retrade request.

Implications for Buyers and Sellers

For buyers, a retrade can result in a reduced purchase price. Alternatively, the seller might offer credits at closing to cover anticipated repair costs or other expenses. If negotiations fail to reach a new agreement, the buyer retains the option to walk away from the deal, often with their earnest money deposit, depending on the contract’s contingencies. Sellers, on the other hand, face the potential for a lower sale price or the obligation to provide significant credits to the buyer. They might also need to agree to perform specific repairs, which adds unexpected costs and delays to their timeline. The most significant risk for a seller is the deal falling through entirely, forcing them to relist the property and potentially incur additional carrying costs.