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Buyers Guide: Concessions Beyond The APS

by Heather McDowell on 13 Mar 2023

What Are Concessions?

Real Estate Concessions are not unlike other concessions.

In broad terms concessions can be defined as items that are granted, especially in response to demands; a thing given up or traded in favour of something else or a perceived greater good.

While we’ve all heard the phrase “cash is king”.

This, when applied to a real estate transaction, may inadvertently give people new to the market or revisiting it after a hiatus the impression that there only “wheeling and dealing” that can happen is around a property’s purchase price. We, at Canadian Real Estate Wealth, are here to tell you that that is simply not the case.

To help us make a case in favour of concession beyond the almighty dollar amount of the purchase price, we’ve enlisted the help of two fantastic, talented and veteran REALTORS ®, Tony Sbrocchi and Aleksandra Nowak. Nowak and Sbrocchi work in, what is arguably the most competitive market in the province, if not the nation; the Greater Toronto Area.

Why Consider Non-Monetary Concessions

These are important considerations for both the buyer and the seller in any real estate transaction.

We asked Aleks and Tony for their expertise on why considering concessions beyond the offer price is important. Here’s what they were able to share with Canadian Real Estate Wealth readers:

“Negotiating goes beyond price, so considering concessions can be the difference between getting the property or not. Any negotiating that has no cost but improves an offer is always a win.”

A buyer may be at the top of the budget and simply has no more room to give, financially speaking, to make their offer more desirable to the sellers. Conversely, the seller may have a certain dollar amount that they must clear in order to ensure the stars align to carry them to their next big chapter.

Alternatively, either the sellers or the buyers may have other pressures, non-financial considerations that, if the other party is willing to examine, may translate to an improved bottom line and a happy closing for everyone.

Here Are The Basics.

The first step to negotiating concessions in a real estate transaction is understanding whether you’re working within a buyers’ or sellers’ market. This a very important step in terms of getting the lay of the land, so to speak. By relying on the expertise of a trusted real estate professional, you can learn which party has the leverage in the situation.

This discussion is usually led by your REALTOR ®, as is the conversation around your raison d’être. For the latter, your real estate salesperson and you will discuss what your motivators are. For example, often new buyers are driven by affordability. There is a very hard line that caps how much they can afford to spend.

For investor clients, cash flow may be the name of the game and everything else is negotiable. For senior residential purchasers, often the location-specifically proximity to family members or the actual style of home (i.e. bungalow) is their primary determiner.

The List.

Here is a list of non-monetary concessions that can be up for grabs beyond the purchase price. These very well could make the difference between a deal dying on paper and a transaction making it to the finish line; closing day.

Closing Date: This can really work in favour of either a buyer or a seller as either party may find themselves in a situation that demands a particular closing date. That translates into negotiating power for the other side of the transaction.

Inclusions: While oftentimes things like appliances are standard-issued, a buyer may wish to offer the seller the opportunity to retain them in order to recoup some of the ‘loss’ of a lower offer amount. Conversely, a seller may make a deal more lucrative to a buyer by throwing in household items that are atypical to real estate transactions such as a ride-on lawnmower, backup generator or snowplough. Used correctly, this can work in the best interest of either the seller or buyer.

Deposit: A higher deposit can impress upon the seller the seriousness of a buyer who brings an offer with a lower dollar amount. It demonstrates that the buyer has ‘more skin in the game’ and thus is often most advantageous for the buying side.

Home Inspection: This tactic is predominantly reserved for a buyers’ market, however, it does crop up on rare occasions with properties that are labelled “handyman’s special”. This is where a seller includes the offer to foot the bill for or provide a potential buyer with the report from a home inspector. The purpose is to set a buyer’s mind at ease about the integrity of the property, or at least give them the sense of peering behind the curtain before making the big-ticket purchase. This is generally a strategy used by a seller.

Closing Costs: Although not very common in this economy, in the tough real estate markets of yesteryear, as an incentive offered to buyers in order to purchase their house over another, sellers may offer to pay or rebate part of all of the closing costs for the buyers.

Sale of an Existing Home: This is one of the more challenging concessions and is usually only successful in a sellers’ market and it manifests as usually as a condition of sale. In a nutshell, the deal will not happen if the seller does not find somewhere else to purchase or waive that condition. This is a tactic that benefits the sellers and is regarded as a disincentive to buyers.

The single most tide-turning concession that Mr. Sbrocchi and Ms. Nowak have seen is a condition-free offer, often also referred to as a cash offer.  This means that the offer does not include a condition, including those of inspection or finance.

We asked Sbrocchi and Nowak to speak to why that is the case. Here’s what they had to say,  “With a "cash offer" there is no waiting to see if the inspection goes well, a smart buyer will do a pre-inspection, and if the buyers qualify for financing, smart buyers are typically pre-approved prior to the offer. These concessions on an offer have the potential to be a big value add for a seller. “

In Conclusion,

With the help of your REALTOR ® and after a period of house hunting, you’ve finally found a home that you think will fit both your lifestyle and budget. You’re ready to make an offer! Prudence dictates that you come in with an offer competitive enough to land the property, but not overpay. On the other hand, your family’s budget is not limitless.

The best advice is always to offer what you can afford. While there are times when a bidding war is unavoidable, don’t bid for the sole purpose of winning. Instead, explore a more dynamic offer approach that considers non-monetary concessions. This approach may bring unexpected results in resolving an unseen pain point of the other party. If you are unsuccessful, get back on the horse with the help of your REALTOR ® and know that everything will turn out exactly as it is meant to.

Need help getting the competitive real estate edge in the Greater Toronto Area, consider reaching out to Aleksandra or Tony at [email protected].

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