This April, one of Inman’s most popular recurring theme months returns: Back to Basics. All month, real estate professionals from across the country share what’s working for them, how they’ve evolved their systems and tools, and where they’re investing personally and professionally to drive growth in 2022. It’s always smart to go Back to Basics with Inman.
This article was last updated April 7, 2022.
As I write this piece, I’m coming off of a new listing that I just marketed, one that had 25 showings in two days and 10 offers received thus far. I, too, just completed my multiple-offer spreadsheet summarizing what has been received thus far, and I had to analyze a variety of aggressive and interesting terms that were presented.
As a buyer’s agent, your fingers are likely hurting from all of the offers you’ve been writing. You’ve probably had to try numerous things to make your buyers’ offer stand out, getting more and more creative each time.
As a listing agent, you’ve probably grown bleary-eyed from summarizing multiple offers into a spreadsheet for a seller, and at this point, you’ve likely seen it all.
Agents have amassed quite a collection of crazy stories of some unbelievable offers they’ve been involved with, especially given the current real estate market. There was the buyer who recently offered to buy the seller another home in Austin, Texas, which sealed the deal in a highly competitive multiple-offer situation.
In another scenario, a home in Berkeley, California, was listed for $1.15 million, received 29 offers, sold for nearly double its asking price at $2.3 million and closed in two weeks.
It would be hard for most buyers to be able to compete with this, and even if they could, at a certain point, the margin of diminishing returns kicks in where utilizing these tactics may leave a buyer waking up with a huge case of remorse the next day. After all, a house is a material object, and there will always be another one — even in this scarce inventory market.
While these kinds of situations are highly unusual, there are some trends emerging when it comes to contracts that have become part of the new normal with buyers and sellers today. Here are nine contract trends we’re seeing right now.
1. Offers over asking price
This has become standard fare in the post-pandemic market, where the list price is simply a starting point, but by no means is it what the property is likely going to sell for.
Writing an offer at asking price in many popular price points can almost be perceived as the glass half full by the listing agent and seller. Agents are advising buyers to come in with a strong offer over asking price right off the bat, as they likely only have one shot at getting their offer considered.
2. Escalatory addendums
Speaking of over-asking offers, the escalatory addendum or clause has become a popular tool in many markets. This approach allows buyers to make an aggressive offer but, at the same time, puts some limits on it. It controls how high they’ll go over the highest offer, not exceeding an amount of their choosing.
In some markets, escalation clauses are not looked upon favorably or customarily utilized. Some feel that escalatory addendums can create unnecessary complications, and confusion for buyers and sellers.
3. Waiving or managing appraisal contingencies
In today’s market, making an offer over asking price means the sellers expect the buyers to commit to the price they have offered. No more making an aggressive “overpriced” offer if the buyer is getting a mortgage, knowing that the appraisal will be a fail-safe to end up paying less.
Sellers and listing agents are increasingly pushing back on these kinds of offers, asking buyers to waive the appraisal contingency completely. Buyers and sellers are negotiating a certain guarantee of the buyer being willing to pay a certain amount over the appraised value should the property not appraise.
4. Cash offers
Even better than having to deal with appraisals at all is the cash offer, and there seems to be a ton of cash purchases in the market right now. The hitch with cash offers is that they may come in at a reasonable price but not pie-in-the-sky amounts.
Hence, there is a reason why these buyers are able to pay cash as they’ve likely made smart decisions about their money along the way in life, or they’ve hit the lottery. No matter the market, cash is still king, and it often remains a seller’s first choice for the ease and simplicity it brings to the transaction.
5. Waiving inspection contingencies
Often considered highly risky, some markets are seeing more buyers write offers waiving inspection contingencies versus others.
In some highly competitive markets where nearly every buyer is flush with cash and looks extremely strong on paper, some are waiving the inspection contingency as a way to provide more certainty in the transaction for the seller.
6. Selling ‘as is’ or limiting repairs
If a buyer doesn’t want to risk waiving the inspection contingency, many are offering to buy the property “as is” without any repair requests made to the seller.
Alternatively, buyers are stating that they will limit any repairs requests to something that would be considered of a major or structural nature that is uncovered during inspections and was not relayed to the buyer on any disclosure documents.
This gives the seller assurance upfront that they aren’t going to nitpick over the “handyman” kinds of repairs.
7. Paying the seller’s closing costs
Did you read that right? Yep. As if it weren’t enough for a buyer to offer significantly over asking price with some sort of guarantee on the purchase price if an appraisal is involved, many buyers are offering to kick in a certain amount toward a seller’s closing costs.
The amount of this concession varies depending on the price point of property and a buyer’s financial bandwidth to do so, but for penny-pinching sellers, this tactic may grab their attention — no matter the amount offered.
8. Post-closing occupancy agreements
This term has become nearly standard on almost every offer being negotiated today where a seller is currently living in their home. Every seller wants the ability to stay anywhere from a few weeks to several months past the closing date, depending on what they are doing next.
Buyers, it seems, have been more than willing to grant this request, often at no or little cost to the sellers. In many cases, buyers are offering free occupancy to sellers past closing, subject to the sellers keeping utilities in their name and continuing to maintain the property.
9. Free tickets, maid services, sports memorabilia
Some buyers may tap into things the sellers like, based on what they glean from touring their home. Perhaps that’s passion for a particular sports team or kind of sport. In that case, buyers may offer to sweeten the deal with tickets to a particular game or even season tickets.
In some cases, presenting a special jersey or other piece of sports swag that may be considered highly coveted is offered with the hopes of swaying the seller.
Buyers are also offering to pay for cleaning or lawn care services for the seller’s next home for a certain amount of time, thinking that may make life a bit easier for their next move. The sky is the limit when it comes to offering “freebies” that just may make the seller bite.
In low-inventory, ultra-competitive markets like we are currently experiencing, there won’t be a shortage of creativity on behalf of buyers and their agents to offer contract terms that will help seal the deal.
While there are many strong gestures of good faith made as part of an offer, for most sellers, it comes down to selecting the one that offers the most simplicity and certainty with the least amount of hitches. They want to know that the only negotiation that is going to happen is when an offer is made and nothing more beyond that.