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Health & Fitness

Asking for Seller Concessions

Have you ever heard of seller concessions?  Seller concessions are pretty common in a real estate transaction.  So what exactly are seller concessions?  Basically, it means that the seller will contribute some of the sales price of their home to help a buyer close the transaction.  For example let’s say a home was on the market for $100,000.  They buyer offers $100,000 with 3% sellers concession.  This means that the seller will give back to the buyer $3,000 to help them close the deal.

In a real estate transaction,  there are a few cost to the buyers.  First of all they have a down payment.  Let’s assume this is an FHA purchase then the buyer has to put 3.5% down.  There are additional closing costs associated with the mortgage and taxes that usually are in the ballpark of around 5-6%.  So a buyer will need 3.5% down plus an additional 5-6% to close.  I always like to round high so lets use that $100,000 home above and say an FHA buyer would need about 8-9% of the total value to get the deal done, so it’s in the ballpark of $8-9,000.  So if the buyer writes an offer for full price and asks for 3% seller concessions back he would need 3.5% down, the seller would give him 3% towards the cost  and maybe another 1-2% to close it up?  Does this make sense?  So if a buyer can get seller concessions they will need somewhere in the ballpark of 5-6% of the total value to buy the home for $100,000.  Pretty easy, right?

The bad part about concessions is that it weakens your offer.  In this current market its pretty ordinary to have multiple offers.  If a seller gets 2 offers, and one is asking for money back to close and one is not, which one do you think they will take?  Obviously the one that doesn’t need help to close. There are a few ways around it though.  For instance let’s say you write an offer for $103,000 for that $100,000 home and ask for the 3% concessions. You are offering more for the home but asking for the money  back which means you are offering the seller exactly what they wanted.  Of course, there are issues involved there too.  What if the home doesn’t appraise for the 103 price?  Then what?  You can read some of my old blog post about appraisals here.

There are a lot of options when buying and selling a home in today's market. I try to educate my clients on all the pro’s and con’s of each decision so they can make one that’s right for them and their pocketbooks.  If you have any questions about selling your home…..buying a home…..investing in real estate…...or starting a career in real estate contact me today!

Chris Taylor 
Keller Williams 
586-524-1095 
Chris.taylor@kw.com

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