If you are buying or selling a home, you need to be familiar with what seller concessions are. Seller concessions are a monetary allowance from the seller to the buyer to help with their closing costs. A buyer will still have to supply their down payment contribution. Each party has closing costs when the buy or sell a home. Depending on the type of loan that the buyer is doing, there are limits as to how much a seller can contribute. The contribution can be a percentage of the purchase price, or it can be a flat dollar amount.
Pros and Cons to the Buyer
As a buyer, seller concessions can help you buy your first home. You will still need to contribute your down payment amount, but the seller can contribute to all or some of your closing costs. This will help if you do not have all the funds available to buy your home. It may also help alleviate spending all of your savings in case you need it to do repairs or updates to the home after you close. It is also very important to make sure that your buyer's agent knows, so that the seller concessions can be written in the purchase agreement.
A con as a buyer asking for selling concessions is that some sellers do not understand them fully. They may have this notion that they should not be helping a buyer buy their home. A buyer should be able to afford to buy it on their own. It also hurts a buyer in a busy seller's market. Your competition may be better qualified because they may not need the seller concessions. A seller may be more inclined to take an offer that does not cost them more to sell.
Pros and Cons to the Seller
As a seller, you at least want to know what they are. You home may be sitting stagnant with no offers coming in. Do not focus on helping the buyer with giving them concessions. Just concentrate on your bottom line net that you will be getting. If your net price is acceptable, help the buyer with the closing costs and get the deal to work. Isn't that your ultimate goal? To sell the house? Another option is the buyer can offer a little more on the purchase price to compensate for the concessions. For example, if the buyer needs $2,000 in seller concesssions, have them offer $2,000 more on their offer price. As long as the home will still appraise for the higher offer amount, this will help to compensate for the extra expense.
A con to the seller is obvious that this seller concession will be an extra expense to the seller. It will be a deduction at closing and added to your selling costs. Still, if the bottom line is ok, try and get the deal to work.
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