Securing a great deal on a house often involves strategic negotiating, unlike the stock market where prices are out of your control. A useful strategy in real estate is the price concession letter, which requests a price reduction from the seller, usually once you’re in contract.
While nobody enjoys receiving a price concession letter, it can be crucial for a buyer dealing with uncertainties. It’s important to approach this with a tone that is collaborative rather than combative. I’ve personally used price concession letters in three of my property purchases to negotiate better prices. In one case, I discovered additional remodeling issues; in another, the uncertainty of a pandemic influenced my decision; and once, a potential future issue led to an $80,000 discount request, which resulted in a $50,000 credit.
For example, when I was eyeing a larger house due to our growing family, I appreciated the extra space and potential for high returns due to its location and size. However, post-contract, doubts crept in due to the extensive remodeling required and the impending arrival of a new baby. I decided to write a polite price concession letter after discovering a small crack in the foundation, potentially a costly fix.
My letter reassured the sellers that the escrow process was on track, but I highlighted my safety concerns due to the foundation issue, proposing a $20,000 price adjustment to address it. The sellers, empathizing with my situation as parents themselves, agreed to a $10,000 concession which I used towards the necessary repairs.
This positive outcome was possible because of our good rapport; the sellers had rejected higher offers in favor of a family they felt comfortable with. Their past investments in the property made them understand that my request was reasonable, leading to an adjusted concession in escrow.
Later, another property caught my eye right after the lockdowns began. Despite the market’s instability, I developed a good rapport with the seller’s agent during private tours. The sellers initially withdrew the listing due to low offers, but reintroduced it three weeks later. By allowing the selling agent to represent both sides and accepting a reduced commission, I secured the property for $170,000 below the asking price.
Once in contract, concerns about the prolonged pandemic led me to write a more assertive price concession letter. I detailed recent price drops in comparable properties and a lower-than-expected appraisal, requesting a $50,000 price cut. This time, the negotiation was tougher, resulting in a drawn-out process that almost cost me my earnest money deposit.
In reflection, these experiences underscore the importance of how you communicate in a price concession letter. It should be empathetic, factual, and reaffirm your intent to purchase. This approach not only helps in securing a price reduction but also maintains a good relationship with the sellers, which is crucial in real estate transactions.
For those interested in a less hands-on investment approach, platforms like Fundrise and Crowdstreet offer opportunities to invest in real estate passively, focusing on multifamily rentals in promising regions or individual deals in emerging cities. These platforms provide a way to diversify investments and achieve financial freedom through real estate.
