What does it mean to retrade in real estate?
What is a "retrade" in real estate?
In real estate, a "retrade" occurs when a buyer renegotiates the terms or price of a property deal after initially agreeing to different terms, usually due to new discoveries about the property, appraisal issues, financing troubles, or market changes. This practice is often seen negatively by sellers as it can be perceived as a tactic to force a lower price and may lead to mistrust or deal collapse. However, buyers may view it as necessary to avoid overpaying or assuming unforeseen risks.
The reasons for retrading can vary but often include:
- Discovery of New Information: If the buyer discovers new information about the property that wasn't disclosed or apparent initially, they may want to renegotiate. This could include issues like structural problems, zoning issues, or discrepancies in square footage.
- Appraisal Issues: If an appraisal comes in lower than the agreed purchase price, a buyer might retrade to adjust the price in line with the appraisal value.
- Financing Troubles: If the buyer encounters unexpected difficulties in securing financing at the agreed terms, they might seek to renegotiate.
- Market Changes: Fluctuations in the real estate market could also prompt a buyer to retrade if property values have changed significantly since the initial agreement.
Retrading is often viewed negatively by sellers, as it can be perceived as a tactic to force a lower price. It can lead to mistrust and may even cause deals to fall through. From a buyer's perspective, retrading can be a necessary step to ensure that they are not overpaying or taking on unforeseen risks with the property.
Retrades are more common in small and mid-market deals. Investors with a national footprint and institutional real estate investors typically avoid retrades because the perception of being an investor that frequently retrades deals can make it more difficult to compete for future opportunities.
