Top 5 Most Frequent Negotiation Tactics in Los Angeles Real Estate

Joe Piasecki • November 19, 2024
A diagram showing temporary rate buydown options

How the buyer’s agent initiates an offer with the listing agent can make or break a deal.


Before writing an offer, buyers need to find out as much as they can about the seller’s motivations and what’s most important to them. 


For most sellers, it comes down to price. But not always! 


The extent and duration of buyer contingencies, who pays what fees, flexibility about time of possession, and even the length of the escrow period go hand-in-hand with total purchase price to shape the bigger picture of the deal. 


Buyers may also negotiate upfront cash credits for closing costs or to buy down the initial interest rate of the mortgage – instead of a price cut, asking the seller to make monthly payments more affordable, which I have found tends to be more persuasive. 


Once an offer is accepted, repair credits for previously unknown defects usually come into play between buyer inspections and the removal of investigation contingencies.


In my experience, these are 5 of the most frequently negotiation points for homebuyers in the Greater Los Angeles Real Estate Market: 


1. Contingencies

If there’s anything sellers prioritize as much as money, it’s having as much certainty as possible that the buyer is willing and able to close the deal. The attractiveness of cash offers isn’t that buyer money is any better than a bank’s money, it’s the removal of buyer loan and appraisal contingencies that could blow up a deal. In competitive situations, buyers can make a lower offer more attractive by tightening contingency periods down to no more than what’s necessary. The buyer’s agent should pre-schedule inspections to get a jump start on the calendar, and work lockstep with an expert mortgage broker who can cut through underwriters’ red tape. The tightest loan-involved escrow I’ve accomplished was for a $2.7 million purchase with a $2 million loan in just 16 days.


2. Time of Possession

Back in 2022, my clients came in second place out of three offers for their dream home on a quiet cul-de-sac in the heart of Mar Vista. But we were the only buyers willing to accept a delayed move-in date to accommodate the seller’s needs, which was important enough to the sellers that they accepted our offer that was tens of thousands of dollars under the top position. An effective buyer’s agent will work to discover the priorities and motivations of the seller, which could include additional move-out time, delaying close of escrow to accommodate a tax-deferred 1031 exchange, or even to push the sale into the next tax year.


3. Cash Back at Close

Buyers who need help with closing costs or want to reduce their initial monthly loan payments can negotiate cash back at close from the seller. In addition to improving affordability for the buyer, these seller credits reframe a deal around collaboration to meet what a buyer can realistically achieve instead of a more conflict-driven battle over a purchase price. First-time buyers I represented in Pico-Roberson succeeded with a below-ask offer on a cosmetic fixer because we refocused the conversation from purchase price to monthly payment. By using seller credits to buy down the initial interest rate for the first two years of the mortgage, we brought the seller’s price expectations back to reality and the buyers’ monthly expenses to a lower amount than they had when they were renting!


4. Who Pays for What

Conventions of Southern California real estate are that the seller typically pays for most costs of sale except buyer escrow and lender fees, but that doesn’t always have to be the case. With the restructuring of agent commissions, allocation of costs in residential real estate is getting more attention. Even before these changes, small tweaks to allocation of costs such as HOA assessments and move-in fees can have a positive impact on negotiations, especially in a multiple counter-offer situation.


5. Repair Credits 

Negotiations often continue during escrow after a deal is reached. When buyer inspections uncover previously unknown property defects, buyers have leverage during their contingency period to ask for help with repairs – usually in the form of a reduced purchase price or cash back from the seller at close of escrow. Fairness should be the guiding principle, and an experienced agent will know what to ask for and how to ask for it – or, when representing sellers, whether to accept or deny requests based on listing history and current market conditions. In my experience, older homes in pretty good shape will still typically involve a conversation about seller credits related to electrical and HVAC system inspections, unless a seller gets ahead of the issue with appropriate disclosures.


Call me at (310) 733-0931 to discuss your personal situation in the context of current market trends.


Joe Piasecki

Jasan Sherman Real Estate Collective

Coldwell Banker Realty

(310) 733-0931

hello@joesellslosangeles.com

DRE 02158933

A man and a woman are shaking hands in front of a sold sign.

What’s a Seller Carryback, and Is It Right for Me?

By Joe Piasecki • November 19, 2024
Seller Financing in residential real estate transactions – also called Seller Carryback, because the seller is “carrying the note” – means that a buyer will make mortgage payments to the seller rather than obtaining third-party financing from a bank, credit union or mortgage wholesaler. Different from a lease option or lease purchase, the buyer receives title to the property and the seller holds a lien as the mortgage lender. In residential deals for single-family homes, condos or small multi-unit properties in Los Angeles, seller financing agreements typically amortize payments over a 30-year schedule but run for a much shorter period of time, usually 18 to 36 months, before a balloon payment of the full balance is due (usually paid by the buyer obtaining traditional financing). Seller carryback arrangements usually save buyers money through lower interest rates, and give buyers time to reorganize personal finances to achieve more favorable long-term rates down the road. Sellers benefit not only by collecting interest, but are usually able to sell their property at a higher price by offering loan terms that banks can’t beat. Some sellers may also benefit from spreading out tax liability across multiple tax years. Carryback opportunities are relatively difficult to find in Los Angeles, however, as they are only viable for sellers who have little to no existing mortgage payoff and don’t need proceeds from the sale to purchase a replacement home or conduct a tax-deferred 1031 Exchange. But they do happen! I represented the seller of an inherited second home in the Westchester neighborhood of Los Angeles in late 2022, when many buyers were crashing out of deals due to quickly rising mortgage interest rates. By taking a 40% down payment and extending seller financing on the remaining 60% for 21 months, we pushed multiple offers $156,000 above asking price, and my seller also received thousands of dollars in interest income for a year and nine months after the sale. Here are some of the major points to consider: BUYER UPSIDES: Lower interest rates No loan origination fees Build equity while improving personal finances BUYER DOWNSIDES: Sellers usually need a higher down payment than a bank A balloon payment will be due, so be sure you can obtain financing before your deadline SELLER UPSIDES: Higher sales price and increased net proceeds No buyer loan or appraisal contingencies Sellers collect interest on money owed Potentially spreading out capital gains tax obligations SELLER DOWNSIDES: Legal costs and inconvenience to pursue foreclosure if buyers default Sellers can’t do a tax-deferred 1031 Exchange if they carry the note for an investment property BEST PRACTICES FOR SELLERS: Make sure the buyer’s down payment is enough to cover outstanding loans, cost of sale, initial tax obligations and any other immediate financial needs Have your agent order a buyer-paid tax notification service to make sure the buyer is paying their property taxes on time Have your agent instruct escrow to make sure the buyer has home insurance that also covers the seller’s interest as lender Sellers should charge at least the federal minimum interest rate to avoid liability for “foregone” interest that’s considered a taxable gift Always consult with an attorney or tax specialist Call me at (310) 733-0931 to discuss your personal situation in the context of current market trends. Joe Piasecki Jasan Sherman Real Estate Collective Coldwell Banker Realty (310) 733-0931 hello@joesellslosangeles.com DRE 02158933
A man and a woman are standing next to each other in a room looking at a clipboard.

Essential Homebuyer Contingencies & Inspections

By Joe Piasecki • November 19, 2024
Offer accepted? Congratulations! Now the real work begins. A good buyer’s agent will assist you – and sometimes push you – to order a variety of professional inspections of the property you plan to buy. Far from just peace of mind, inspections give buyers fair warning about potentially costly unknown property defects and leverage to do something about it before the transaction closes. In my experience, inspections pay for themselves many times over. Licensed inspection reports are a tool for me to negotiate repair credits during the escrow’s contingency period, when the balance of power tends to shift from seller to buyer. But first, contingencies. Contingencies allow buyers to exercise their right to leave a transaction without sacrificing their earnest money deposit. Inspections are part of the buyer’s Investigation of Property contingency, which includes all tangible aspects of the home and other external factors impacting the home (noisy neighbors, school attendance boundaries, etc.). Loan and Appraisal contingencies protect the buyer if the lender denies their loan or the home does not appraise for the purchase price, in which case a price reduction or higher down payment would be required for loan approval. New in 2024 due to volatility in the industry, the Insurance contingency allows buyers to confirm both the availability and cost of homeowners insurance. Review of Seller Documents gives buyers time to review legally mandated seller disclosures , and Preliminary Title Report discloses liens, restrictions, easements or other determinants against the property. Common Interest Disclosures report the financial health and rules governing any HOAs, and Review of Leased or Liened Items discloses obligations that run with the property, including any solar power payment obligations. Back to Investigation of Property, there are usually two rounds of physical inspections – an initial look to identify potential issues, and specialty inspections that explore specific defects and suggest costs of repair. Each inspection might cost $100 to $350 or more, depending on the size of the property – as your agent I can provide referrals and help you price compare. EXPLORATORY INSPECTIONS General Inspection: A licensed and insured general inspector produces a lengthy overview detailing observations about all aspects of the home, from large core components such as the home’s foundation down to whether each burner on a gas range is working properly. The general inspection report flags issues for further investigation by subject matter experts who will also estimate costs of repair. Moisture & Mold: Identifying possible sources of past or present moisture intrusion and any evidence of mold is essential to protecting your health and finances, as mold remediation tends to be pricey. If needed, consult a Mold Remediation Specialist during your contingency period for a cost estimate. Termite: If a termite clearance report is not provided by an HOA or a seller, check for wood-destroying pests and related damage before releasing contingencies. Sewer Line: Running a camera from your home to the main line in the street can uncover costly unknown damage, allowing the buyer’s agent to negotiate for repair credits if work is needed. SPECIALTY INSPECTIONS Chimney: It’s rare to find a chimney in Los Angeles that doesn’t have something wrong with it, often due to seismic activity. Be realistic in your expectations, but be highly vigilant about fire safety issues. Roof: Roof certifications may be needed for home insurance purposes. In other cases, it may be sufficient to have a roofer physically inspect for damage and produce an estimate. HVAC & Electrical: A general inspector will call out possible issues, but it’s always a good idea to have a specialist inspect your heating, air conditioning and electrical systems. It is extremely common to find outdated and potentially dangerous electrical panels in older homes and condominiums throughout Greater Los Angeles, as well as central air systems in need of repair. In my personal experience, HVAC and Electrical inspections almost always result in a repair credit. Plumbing: A general inspector will call out any plumbing concerns, and if there are issues a plumber can address them more in detail and price out repairs. Foundations/Drainage/Geology: During one recent sale in West Los Angeles, a tip from our general inspector prompted a follow-up foundation inspection that discovered moisture issues underneath a home. Geologists typically aren’t needed for flat land, but recommended for all hillside or heavily sloped properties. Pool & Pool Equipment: Older pools and pool equipment can be expensive to repair. As your agent, reports by licensed and insured home inspectors help me protect your health and financial interests. During the contingency period, I can use these reports to negotiate for sellers to help fund repairs of any previously unknown defects. Unless a buyer expects to replace all major appliances within the first year, I can also push for the seller to fund a one-year home warranty policy to cover everything from home appliances to central air and heat to the water heater and any pool equipment. Call me at (310) 733-0931 for a step-by-step consultation of everything that goes into the homebuying process. Joe Piasecki Jasan Sherman Real Estate Collective Coldwell Banker Realty (310) 733-0931 hello@joesellslosangeles.com DRE 02158933