Here are some of the most common scenarios:. The home inspection identifies deep cracks in the driveway as a safety hazard. Your buyer asks you to address the problem as part of their inspection negotiations. You want to close ASAP so you can move your family before the new school year begins. You listed your home three months ago and have yet to receive offers. Meanwhile, buyers are attracted to the prospect of saving on escrow and lender fees.
If they purchase your home, they can channel these immediate cash savings into new furniture or remodeling. You got a job out-of-state and need to sell your home ASAP. Seller concession is essentially where the seller is going to pay a portion of your closing costs. Now, let us note that we are talking about a portion of your closing costs and not all of the closing costs. The seller will pay a percentage of the purchase price to go towards the costs that are required for you to close on a property.
Everything associated with you closing on a property and acquiring a loan is going to be the closing cost so the seller will be able to give you a credit if you can negotiate it well towards those closing costs. Something to keep in mind here is that closing costs will never be able to go towards your down payment. Your down payment is going to be the minimum required investment for a property.
This number will never be able to cut into the down payment required. So the seller concessions only go to pay down a portion of the closing costs. Seller concessions are limited by loan types. Not all loans have the same amount of seller concessions. Depending on how much you put down, the seller concession for conventional loan s may go up to percent of the closing cost that you can receive from the seller.
You may even be able to bring your closing cost obligation down to zero. Importantly, getting a seller concession does not mean the seller will hand over cash to pay for your upfront costs.
Typically, seller concessions happen when the seller is having trouble moving their house. A seller concession can also be initiated by a buyer who needs help with their closing costs. This effectively means the buyer is rolling their closing costs into their mortgage instead of paying them at the closing table. Other times, it will not.
In no circumstance , however, may the amount of seller concessions exceed the amount of closing costs charged to the buyer. Nor can seller concessions be used for the down payment, home repairs, new appliances, or for any other purpose than to pay for closing costs shown on the final loan documents.
The specific items that can be paid by the seller vary by loan type. But generally, seller concessions are allowed to cover:. For a full description of these items and others that may be covered by a seller concession, see our complete guide to mortgage closing costs.
Seller concessions are a great way to save money at the closing table and maximize your down payment. The biggest drawback is, you end up with a bigger loan amount than if you would have negotiated a lower home price instead of the seller concession.
Another potential drawback is that asking for a concession could make your offer less competitive in a hot market. But for many home buyers — especially first-time buyers who have a limited amount saved for the down payment and closing costs — seller concessions are well worth it.
If you need a real estate agent who can assist you with finding your new home and making an offer, visit Rocket Homes SM to work with a highly-rated local expert. Each company is a separate legal entity operated and managed through its own management and governance structure as required by its state of incorporation, and applicable legal and regulatory requirements. Home Buying minute read August 13, Home Buying 9-minute read August 09, Buying a home can be an exciting time.
However, closing on a home is an expensive endeavor. Home Buying 9-minute read July 02, Looking to buy a home soon? Here are 45 tips to help you through the entire home buying process. How Seller Concessions Work 6-minute read August 13, Let a pro do it for you. Keep your chimney clean with a local pro's help. Get A Quote Today. What Are Seller Concessions? How Do Seller Concessions Work?
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