What Is A Sellers Concession?
What are Sellers Concessions and how exactly do they work?
Whether you are Buying OR Selling a Home, Seller concessions can be the winning difference, in bringing both Buyer and Seller together for a Win-Win.
So , technically, what is a sellers concession?
Now If you the homeowner, you’re probably thinking: ‘Why would I want to pay for someone elses closing costs when I have my own closing costs to pay?
Let’s take a look at an example how sellers concessions could benefit both the buyer and seller:
As a Buyer, Say you found a house that you have fallen I love with and it’s listed for $300,000. and you really need $10,000 to help towards your closing costs.
In todays market, there’s a good chance you may be competing against multiple offers and perhaps even Cash offers.
Before you make an offer, your agent should have a good idea of how much the home is worth.
Using this example, your agent might think it’s worth $310-$315,000.
You could offer the seller his full asking price of $300,000 and ask for a seller concession of $10,000 towards your closing costs.
But this is going to net the seller $290,000.. Which, mostly likely WILL NOT be appealing.. And if the seller is looking at multiple offers, they may be quick to put your offer in the “No Go” stack.
The best way to turn this around is to make your purchase price $310,000 ( or slightly more) and then ask for the $10,000 in sellers concessions towards your closing costs.
The seller would then net their Full asking price of $300,000.
Plus the buyer gets their closing costs paid.. It’s a Win-Win!
The only caveat is that the home must appraise for at least the amount of the contractual purchase price.. $310,000 in this example.
Some buyers might be apprehensive about offering over the list price, thinking their payment will increase significantly.
Let me put those fears to rest..
To quickly calculate an estimate of how much your payment will increase if you adjust your offer price, use this simple formula: It’s $4 per thousand..
Again, using this example: You’re offering $10,000 over the list price. $10,000. X .004 = $40.00
Now ask yourself: Is an extra $40 a month on my payment worth having my closing cost paid, AND having a much better chance of being the winning bidder for this house I love?
You might be wondering if this is a common practice.
In fact I looked at the last 30 homes that have sold in the past 60 days ranging in price from $110,000 to $360,000.
18 of the homes sold had seller concessions. And out of those 18, 7 of them sold for over the list price.
As a buyer, It’s also important to know your limitations on the amount of concession you can ask for from a seller....That is, if you are financing your new home.
This depends on which type of financing you’re doing. Your loan officer will be able to give you the best advice based on your specific situation.
Asking for 3% of the purchase price for a seller concession is very common in our marketplace. 3% also falls within the limitations of all types of financing too.
I’m Curious, as you’re watching this video, are you a buyer, or a seller? Let me know by dropping me a comment below.
So the next time you ask someone how much their house sold for and they say $300,000 with a $10,000 seller concession.. What they are really saying is their home sold for $290,000.. That’s what they walked away with.
Keep that in mind when you’re chatting up the neighbor about how much their home sold for.
The key to making this work for both sides is a meeting of the minds. Before your Realtor writes the offer, they should ask the other agent great questions to learn as much as possible about what is most important to sellers. It’s not always about the money, guys!
Have your agent find out how many offers are currently on the table.
Find out if there is a special reason why the homeowners are selling.
Maybe a flexible move out date is important to seller , as to not be pressured while their new home is being built, and has already had 2 delays due to unforseen weather.
Or maybe you can be flexible with needed repairs.. Don’t underestimate this one...It’s worth $$ to a seller to not have to deal with repairs!
Although we live in a technology driven world, I still believe buying or selling residential real estate is a very personal transaction. Selling can be emotional too.
Remember, Knowledge is Power.
It’s easy to get caught up in striving to get what we want.
If you know why and what the other side really wants, half the battle is won. So make sure you have a seasoned Realtor who understands how to bring out the best in sides based on these true needs for a Win-Win.
I’m Lisa Kelly with Premier Realty, and I hope you share this video with someone you think may find it helpful.
Until then, I’ll see you on the next one.