Seller Concessions Ease Financial Burden Associated with Home Purchase

By Keith Loria

As anyone who has purchased a home can tell you, buying a house is an expensive proposition. From saving for a down payment to setting aside money for closing costs and everything else associated with a home purchase, your bank account is undoubtedly feeling strained. If you find yourself in this situation and you’ve already been approved for a loan, seller concessions may help when it comes to alleviating the final cost.

These concessions can either be a set dollar amount or percentage of the purchase price that a seller agrees to contribute to the buyer to help the closing go smoothly and keep the sale from lingering while the buyer tries to find the extra money.

It’s always a good idea to talk with your real estate agent about your desire for a seller concession before making an offer on a home. Your agent can then put these concessions in the sales contract so that you don’t catch the seller by surprise when asking for concessions later on.

In some cases, your mortgage lender can include your need for a seller concession in their pre-approval letter, although this could scare people off from accepting your offer.

A conventional loan contract generally allows sellers to offer assistance with the buyer’s closing costs up to three percent of the total price of the property. The FHA allows up to six percent of the price and VA allows up to four percent.

The good news for sellers is that they’ll be able to deduct some of their concession money from their taxes. For example, discount points and real estate taxes most often will be tax deductible.

For buyers, it’s important to remember that you must use all the money offered by the seller, as anything not applied toward closing costs will be credited back to the seller. To keep this from happening, the money can be applied to home owner’s insurance, taxes or even dues for an HOA. The remaining concession can also be used to buy down the interest rate, lowering one’s payment and saving thousands of dollars over the life of a loan.

Seller concessions are beneficial to both parties in the transaction as they help when it comes to closing a sale quicker while giving the buyer some funds to buy things for their new home. When used properly, seller concessions can be the difference between closing a home sale and losing one.

To learn more about seller concessions, contact our office today.

Reprinted with permission from RISMedia. ©2013. All rights reserved.

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