Using Throw-Away Contingencies to Buy a Home at a Lower Price

Buying a home can be fun, but it can also be stressful, especially in the price negotiation process. Some deals are quick, an offer, maybe one counter-offer, and the deal is made. Others go through a series of counter-offers, with the price bouncing around and a lot of small details entering the negotiations. Those details are called contingencies.

A home seller may put a number of contingencies into a deal, such as:

The free-standing hot tub is not included in the sale.
The storage building is not included in the sale.
Closing cannot occur sooner than a specified date (seller is buying another home and can’t move in until then).

There are other contingencies that crop up during the process from a deal contract to the closing. The home inspection often throws some of these into the deal. Once the inspection report is in the hands of the buyer(s), there can be contingencies added by the buyer(s), such as demands for specific repairs or money to pay for them after closing.

Sometimes other contingencies crop up from the information revealed in the title insurance binder, which the buyer(s) often do not see until after price negotiations are finished, and they’re in the process to closing. Perhaps there’s something in the survey that the title binder mentions, such as a relatively minor encroachment, possibly the neighbor’s fence is a few inches into the property line on one side.

The point is that there are a number of things involved in home purchase deals that make the completion of the deal contingent upon either the buyer or the seller taking some action or agreeing to remedy an issue. Often, you as the buyer may not find one or more of these items to be a problem or a deal-killer. If so, if you’re really into cutting a better deal, you can use these contingencies as bargaining points.

During Initial Price Negotiations

You’re about to make an offer on a home, and you see things like the hot tub or storage building not included. You really don’t have a problem with these items, but you can use them to get a better initial price. Just have the first offer state that these items must be included as the basis for your offer. The same could apply to the stated “not before” closing date. You may not care, but you can use it to your advantage. Make your offer contingent on closing before that date.

You will likely get a counter offer that may include a higher price and keeping their initial contingencies in place or giving them up, or it may be some combination of the two. The idea is to keep working the counter-offers around wanting that hot tub, storage building, or closing date. If the seller(s) really want to keep them in, they may allow you to get a price concession to do so. At any point, they could just say no, but this is a negotiation, so you can use these to better your position.

After the Contract is Signed

Now you’re working with home inspection or title binder issues that come up after you’re in a contract and moving toward closing. You get the home inspection report and see that there are some maintenance issues, such as minor repairs you really aren’t that concerned about. You have the right in most contracts to respond to these new issues with some type of demand for repairs, remedial actions, or monetary compensation.

You can have your objections/requirements submitted for action and see what happens. The seller(s) may just say no, but you can possibly offer them a monetary solution through dropping the price a bit.

This is not the normal process for most buyers, as most people are either so nice they hesitate to get into these type of negotiations, or they allow their real estate agent to dissuade them. “If you really don’t care, why jeopardize the deal?” If you have the desire to get that price down, these are negotiating skills that most buyers do not use to their advantage.

There is one thing that should make you hesitate to use these strategies. You can’t go into them with the “this is the perfect and only home for me/us” attitude. If you really would hate to lose the home, you are too tentative in using these strategies, and you’ll usually give up before any real gains are made.

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