Buying- Seller Concessions

What are seller concessions and why would a seller pay them for you?

Seller concessions is something a buyer can ask for. It means the seller will concede some dollars, and pay for part or all of your closing costs. The maximum is usually 3%, which generally covers all of your closing costs. But why would this be advantageous to you?

Well, on the seller side it doesn’t really matter. For the rest of this video, we’ll use a $500,000 purchase price as the example.

If you made an offer of $500,000 and it was accepted by the seller, the seller gets $500,000 at closing and pays their own closing costs, usually in the neighborhood of 7% to 8%.

The buyer, on the other hand, pays their own closing costs, which is usually about 3%, or in our example, about $15,000.

Now consider if we offered the seller $515,000 and having the seller pay concessions of $15,000. They still net the $500,000 minus their own closing costs. It’s the same for them, no difference as compared to the prior example. But on your side, you need to come up with less money to close on the house, $15,000 less. This leaves that much more in your pocket. What is really happening is that you end up financing the $15,000 of closing costs into your mortgage.

The only minor condition is that the property will have to appraise for that higher amount, in our example, $515,000. But usually that's not too big of a deal.

In a strong seller's market, it's a little harder to ask for seller concessions because the seller usually would have multiple offers to choose from, several of which won't have seller concessions, which means those (offers) will appraise much easier.

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