As the market shifts to more of a buyer’s market, sellers are starting to offer seller concessions to help close deals.
Here is how they work.
Seller concessions in a nutshell
Sellers agree to pay part of the closing costs when making a seller concession. It’s not cold hard cash, but it’ll help cover some costs. In the midst of negotiations, a request for a concession can be made to help cover closing costs. If the Seller agrees to cover closing costs through a Seller concession, they may not negotiate on the Purchase Price.
A wide range of fees can get a whole lot lighter by the way of seller concessions. Property taxes, attorney fees, appraisal fees, title insurance, origination fees, discount points and other fees are among them.
There are exceptions if the home will not be used as the borrower’s primary residence. The seller’s concessions must be outlined in the sales contract to be valid.
What about repairs?
Most home transactions include language about home inspection contingencies. It outlines the buyer’s or seller’s responsibilities in the event of an unsatisfactory inspection report. In this case, a seller can offer a concession to help balance out the buyer’s costs of making the home repairs. Alternatively, the seller can offer a home price reduction.
Once an issue is revealed, the seller is responsible for disclosing it to any other potential buyers.
How much can sellers offer?
This question depends on the buyer’s loan program.
- For FHA programs, the sellers cannot help with the down payment, but might be able to pay for some closing costs.
- VA programs limit seller concessions.
- Conventional lending limits the concession depending on how much of a down payment the buyer has.
Are concessions a strategy for me?
To get an accurate answer to this question, contact your real estate agent and/or loan officer.