What Is a Retrade in Real Estate?

When Do Retrades Happen?

Retrades happen during the due diligence period, after the buyer and seller have signed a letter of intent (LOI) or purchase and sale agreement (PSA) but before closing. This is the window when the buyer has full access to the property, financial records, and legal documents for the first time.

The due diligence period is typically 30 to 60 days. During this time, the buyer verifies every assumption from their underwriting model against actual property conditions, tenant leases, financial statements, and physical inspection findings. Any material gap between what was represented and what is discovered creates grounds for a retrade.

Common Retrade Triggers

The most frequent retrade triggers fall into categories: physical condition, financial performance, legal or environmental, and market shifts. Understanding these helps both buyers and sellers anticipate where negotiations may reopen.

Quantifying a Retrade

Legitimate retrades are backed by specific, quantifiable findings. The buyer calculates the cost to cure the discovered issue and proposes a price reduction equal to that cost, sometimes with a discount for the risk and disruption of the repair.

How Sellers Protect Against Retrades

Sellers cannot eliminate retrade risk entirely, but they can reduce it significantly through deal structuring and buyer selection. The goal is to make the retrade more costly for the buyer than proceeding at the agreed price.

• Larger hard deposits: Requiring 2% to 3% non-refundable earnest money that goes hard at PSA execution means the buyer forfeits a significant sum if they walk away.
• Shorter DD periods: Compressing due diligence to 21 to 30 days reduces the window for market-driven retrades (as opposed to legitimate findings).
• Accurate OM data: Providing verified, current rent rolls and T12 statements removes the most common retrade triggers.
• Pre-inspection reports: Commissioning a property condition assessment before going to market lets sellers address or disclose issues upfront.
• Buyer selection: Choosing buyers with a track record of clean closings over buyers offering the highest price but with a reputation for retrading.

The NAIOP Research Foundation has studied how institutional sellers structure deals to minimize retrade risk, finding that deals with larger hard deposits and shorter DD periods close at rates 15% to 20% higher than deals with soft money and extended timelines.

How Buyers Should Approach Retrades

If due diligence uncovers a material issue, the buyer has three options: proceed at the original price and absorb the cost, negotiate a price reduction, or walk away from the deal. The right choice depends on the severity of the finding and the overall deal economics.

When retrading, present findings factually with supporting documentation. Retrades supported by inspection reports, contractor bids, and verified financial data are far more likely to succeed than vague claims of "the deal doesn't work anymore."

Be aware that frequent retrading damages your reputation. Brokers track which buyers retrade and will deprioritize your offers in future call for offers situations. As Commercial Observer has reported, broker networks share information about serial retraders, effectively reducing their access to quality deal flow.

Better Underwriting Reduces Retrade Risk

Many retrades stem from underwriting errors in the initial analysis. If the buyer's model used OM-stated rents without verifying against the actual rent roll, or assumed operating expenses without checking the T12, the "discovery" during DD is really a correction of their own mistake.

Teams that extract and verify data from the OM, rent roll, and T12 before submitting their LOI are less likely to face surprises during due diligence. When every assumption in your model traces back to a cited source document, you can bid with confidence that your price will hold through closing.

Retrade vs Walking Away

Not every discovery warrants a retrade. Sometimes the correct response is to walk away entirely. The decision framework is straightforward: if the issue can be cured with a price adjustment and the deal still meets your return thresholds, retrade. If the issue fundamentally changes the risk profile of the investment, walk away.

Examples of walk-away findings include significant environmental contamination requiring remediation of unknown scope, structural defects that compromise building safety, or discovering that the seller misrepresented material facts about the property. These are not price negotiations. They are deal-breakers.

Examples of retrade-worthy findings include deferred maintenance with clear cost estimates, occupancy declines with identifiable causes, or operating expenses that were understated by a quantifiable amount. These are adjustable, and a fair retrade preserves the deal for both parties.

How Market Conditions Affect Retrade Dynamics

Retrade dynamics shift significantly between buyer's and seller's markets. In a seller's market with multiple competing buyers, the seller can reject a retrade and move to the backup bidder. In a buyer's market with limited competition, the seller has less leverage and may accept a larger price reduction to avoid re-marketing the property.

Interest rate movements between LOI and closing create a particular type of retrade pressure. If rates rise 50 basis points during a 60-day DD period, the buyer's cost of capital has materially increased, and their return model no longer supports the original price. These macro-driven retrades are controversial because no property-specific issue was discovered, but they are increasingly common in volatile rate environments.