Jake's Lending Tip of the Week
In the real estate industry, when a seller agrees to contribute funds towards a borrower’s closing costs, it is known as seller concessions. Closing costs are the fees associated with buying a home, such as discount points, buydowns, and title fees. Seller concessions can be a great way for buyers to reduce the upfront cost of purchasing a home.
How do seller concessions work?
Seller concessions are typically negotiated as part of the home purchase contract. The buyer's real estate agent will work with the seller's agent to determine the amount of concessions the seller is willing to give.
The seller concession is structured as a credit towards some, or all, of the borrower’s costs at closing. This credit can be applied towards any purchase-related costs except for the down payment, which is the buyer’s responsibility.
What is the best time to ask for seller concession?
While seller concessions are extremely common, they are much more so in a buyer’s market. This type of market occurs when there are more sellers than buyers. A buyer’s market is the best time to request seller concessions, as the seller wants to incentivize buyers to pick their home over others on the market.
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Currently we are experiencing a seller’s market in metro Phoenix, which makes seller concessions harder to negotiate.
Tips for getting seller concessions
· Be prepared to negotiate - The seller is not obligated to offer any concessions, so you will need to be prepared for negotiations.
· Be realistic – Remember that the concessions effect the seller’s bottom line. If you ask for an excessive amount, the seller may be less likely to accept your offer.
· Have a good reason - When you are asking for seller concessions, be sure to have a good reason. For example, you may be asking for credit towards closing costs because you are a first-time homebuyer or because you have a low down payment.
· Work with your real estate agent - A real estate agent can help you negotiate seller concessions and make sure that your offer is fair to both you and the seller. Working with an agent is ESSENTIAL to a successful negotiation.?