Sunday, August 16, 2009

A Few Thoughts About Seller Concessions

It seems like the topic of seller concessions keep coming up during the negotiation processes. Often, we will be receiving a counter offer from the seller when my buyer calls me up. “My dad says the seller should be paying my closing costs!”

FHA and VA mortgages allow for a seller to pay the buyer’s closing costs up to an amount equal to six percent of the purchase price. For most conventional mortgages, three percent seller concessions are allowed. The seller paying the buyer’s closing cost sounds like a gift, doesn’t it? Something we should negotiate for, correct? I don’t necessarily agree.

I contend that most sellers know what they need or want to net from the sale of their property. And if there are going to be seller concessions thrown in, the seller is going to demand a higher price. So, in effect, seller concessions is another name for a buyer financing their closing costs.

Now, if a buyer is short on cash and needs seller concessions, they are a great and wonderful thing. But if a buyer has adequate funds to close, I believe they will be better served by getting a lower price for the property and lower monthly payment.

I am not anti- seller concessions. I am anti “buyers thinking this is a gift from sellers and not understanding they will be paying interest on those closing costs for as long as they hold that mortgage.

We are finally enjoying summer-like weather in Rochester.  I hope you are enjoying it.
Post a Comment