You put a lot of effort into finding the right house, and now that your closing is just days away, you're finally ready to start calling your new place home. Before this can happen, however, you
BUYERS SAVE MONEY WITH SELLERS CONCESSIONS
Do YOU know what a Seller's concession is??
Seller concessions, popular in both a buyer's and a seller's market, help the real estate buyer more easily make a purchase and the seller complete a sale.
Seller concessions can occur in either residential or commercial real estate transactions.
Before buying or selling a property, understanding the implications of seller concessions can help you avoid a costly mistake.
WHAT is a sellers concession?
A seller concession involves the seller of a property offering a potential buyer an incentive to make purchasing the property more attractive financially. Make certain all seller concessions are written in the contract and agreed upon by both parties. The purchaser may request seller concessions during contract negotiations, or the seller may offer a concession during the listing process. In a buyer's market, seller concessions often reduce the overall purchase price of the property; in a seller's market, a buyer may ask for an increase in the purchase price to offset the cost of a requested seller concession.
If a home inspection reveals that expensive repairs are necessary, a seller may offer a concession to offset potential or known repair costs as a way to help a buyer who may be unwilling or unable to repair a furnace or replace a worn roof. Another example of a seller concession involves a seller agreeing to pay a certain percentage of the buyer's closing costs, thus reducing the buyer's out-of-pocket costs. In a competitive real estate market, the abundance of housing choices may make a house with a seller concession more attractive to a buyer.
The allowed seller concessions vary depending upon the type of loan the buyer chooses. A conventional loan contract generally allows sellers to offer assistance with the buyer's closing costs up to 3 percent of the total price of the property. A 2010 publication from the U.S. Department of Housing and Urban Development notes that a buyer who uses a Federal Housing Administration loan can ask for a 6 percent seller concession in closing costs; however, the FHA could lower that percentage. If the buyer obtains seller financing, the buyer and seller may work together to find a concession level that is mutually agreeable to both parties.
Whether you are the buyer or the seller, discuss any possible seller concessions with your real estate agent. Check with your lender if you are uncertain whether your desired seller concessions fall within your loan guidelines. If you are purchasing a distressed property, a seller concession likely will come from the lender rather than directly from the seller's profits
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