How to Retrade a Multifamily Deal (Without Burning Your Reputation)
A retrade is a price renegotiation after you are under contract. Done with data and good faith it protects your returns. Done cavalierly it costs you the next ten deals. Here is the art and the science of doing it right.
A retrade is asking the seller to lower the price after you are already under contract, usually late in due diligence once it's time for your earnest money to become non-refundable.
It is one of the most powerful tools a buyer has, and one of the easiest to misuse. Handled with real data and genuine cause, it protects your returns from something you discovered after signing. Handled as a negotiating reflex, it costs you a reputation you only get to spend once.
Here is how to do it well, in two halves: the art and the science.
The art: understand what the seller has to lose
The better you know the seller, the better you can solve for what actually matters to them. And price is often not at the top of the list.
The strongest lever available to a buyer is usually the seller's fear of loss. Before you retrade, understand the shape of that fear:
- Does the seller have a 1031 exchange upleg already under contract, with a closing clock running?
- Do they need the proceeds to solve another problem on another asset?
- Has the property already been in and out of contract with other buyers, making certainty of close more valuable than the last few dollars of price?
When certainty of close and simply being done are what the seller values most, an eleventh-hour adjustment is uncomfortable but achievable.
Read the counterparty before you read them your number. Some sellers and their attorneys avoid confrontation, and a firmer approach carries the day. Most of the time, though, a calm appeal to what they stand to lose does more than aggression.
The science: quantify the change and tie it to your returns
In the institutional world the science matters as much as the art, and usually more. A retrade that survives is one where you can show your work.
That means three things, in order:
- Quantify the change. Put a number on the drop in net operating income you uncovered, whether it is a tax reassessment, a repriced insurance renewal, deferred maintenance the tour did not reveal, or a rent roll that did not reconcile to actual leases.
- Explain why it matters. A lower NOI is not just a smaller number. It reduces your loan proceeds at a given loan-to-value or coverage test, which increases the equity required, which lowers the return you can deliver to your investors. Walk the seller through that chain.
- Back into the adjustment. Solve for the price reduction that restores roughly the same return profile you underwrote when you first signed. That number is defensible because it is derived, not demanded.
Conveying and defending a quantifiable, negative movement in property performance during escrow is a buyer's best chance at successfully retrading after the deposit is hard.
It is difficult to do with good data and nearly impossible without it. Know the numbers, and be prepared to defend them.
The line you do not cross
One caveat sits over all of it: retrading when a price adjustment is not objectively merited is not negotiating. It is negotiating in bad faith, and the brokerage community remembers.
You only get one reputation, so spend it carefully. The buyers who retrade with cause and data get taken seriously the next time. The ones who retrade on every deal stop getting the first call.
Where the numbers come from
Every credible retrade rests on a defensible restatement of NOI and a clear read of how that change flows through to loan proceeds and returns. That is underwriting work, done under time pressure, late in a deal.
MultiScreen is built for exactly that moment. Adjust the assumption you discovered in diligence, and it re-solves NOI, loan sizing, and returns immediately, so you can walk into a retrade conversation with the number and the reasoning already in hand.
Terms in this post
- Due Diligence
Due diligence is the contractual period after a purchase agreement is signed during which a buyer inspects the property, audits its financials and leases, and can typically terminate and recover earnest money.
- Net Operating Income (NOI)
Net operating income is a property's effective gross income minus all operating expenses, excluding debt service, capital expenditures, depreciation, and income taxes.
- Letter of Intent (LOI)
A letter of intent is a short, generally non-binding document submitted by a prospective buyer that sets out the proposed price and principal terms of a transaction before a purchase agreement is drafted.
- Loan-to-Value (LTV)
Loan-to-value is the loan amount divided by the appraised value or purchase price of a property, expressed as a percentage, and it measures how much of the capital stack is debt.
- Offering Memorandum (OM)
An offering memorandum is the marketing document a broker prepares to sell a commercial property, containing property details, financial statements, rent roll summaries, market data, and a proforma projection.
More reading
- How to Underwrite a Multifamily Deal: A 7-Step Framework
A practical, repeatable framework for underwriting a multifamily acquisition, from rebuilding NOI off the T12 through sizing debt, modeling the business plan, and pressure-testing the exit.
- 5 Underwriting Bottlenecks That Cost You Deals (and How to Clear Each)
The slow part of acquisitions is rarely the analysis. It is the mechanical work between an offering memorandum landing and a defensible number coming out. Here are the five bottlenecks that eat that time, and how to remove each.
- Cap Rate vs. Cash-on-Cash vs. IRR: Which Metric Actually Matters
Four return metrics answer four different questions, and using the wrong one is how deals get mispriced. A practical guide to when cap rate, cash-on-cash, IRR, and equity multiple each apply.