If the buyer is asking for an amount back, they are asking for seller contributions or concessions to cover all or a portion of the buyer's closing costs. It is ultimately up to the seller if they are willing to do this. The seller may accept that offer with that concession, counter the offer, making an offer of a different amount of concession or reject the offer. Even in this buyer's market; the buyer must be careful not to offend the seller and risk an outright rejection of the offer with no counter.

Happy house hunting!

Kim

Kimberly Thomas
Realty Executives, Brown & Pope of NJ, PA & DE http://www.NJHomesNearPhilly.com
email: kim@kimcanhelp.com
856-308-5989

When a buyer asks for any amount in back in closing costs, the buyer is asking the seller to pay that specified amount in lender and third party fees that would typically be paid by the buyer. Examples of these closing costs may include loan origination fees, appraisal, survey, title, attorney fees, and even points to buy down the interest rate on the buyer’s loan.

The purpose of a buyer asking a seller to pay this is to lessen the required cash required by the buyer at the closing table. This could be because the buyer is short on cash…..or it could be because the buyer simply wants to conserve cash.

When a seller contributes toward a buyer’s closing costs, it is known as a seller concession. When a seller accepts your offer of 300K and pays a buyer’s closing costs of 10K, the seller has, for all intents and purposes, accepted an offer of 290K. The buyer’s lender, and the appraiser will consider the concession, and the property must appraise for the full the value of the sale contract amount of 300K. A failed appraisal would likely terminate the deal.

Lender guidelines generally limit seller concessions to 6% of the sale amount.

If the appraisal supports the sale contract amount, seller concessions are a great vehicle for a seller to move their property and a buyer to conserve extra cash.

If third party expenses total less than 10K, contributions from a seller concession can also be used to buy down an interest rate by paying points. This allows the buyer to enjoy a smaller monthly mortgage payment as a result of the lower interest rate. Seller concessions may not be applied to the down payment, as a seller would be…paying themselves. Sellers can only pay third party expenses on behalf of a buyer.

No seller should ever pay closing costs outside of closing without the lender’s knowledge. No buyer should participate in such activity. Any concealment of these payments without the lender’s knowledge is fraud. Seller concessions, when made as part of the open transaction can result in a win-win for everyone.

It means it is a Buyers market and in order to make the sell many Sellers are willing to neggotiate price. Giving Buyers closing costs can buy down the note rate and make the home affordable. It can also get Buyers into homes who could not otherwise get in to by paying taxes and insurance in advance and the costs of closing which normally would fall upon them. The bottom line, for the Seller, may well be the same as if someone else came in, had closing costs and wanted a concession on price. It is another way of making the transaction work for both parties.

Mkopie,

$10,000 back for "closing costs" seems rather steep to me. I know that a couple years back legislation was introducted to curb the allowable amount of money given back for closing costs, but not sure about whatever happened to that legislation.

I would consult with an attorney to see if this amount is allowable.

Love and Peace,
Francesca, Realtor, ePro

Hi there, looks like you've got your question answered pretty well already - the only thing I would add is that sometimes seller concessions can put pressure on the appraisal. When requested/offered, it generally means that the buyer has just the minimum amount of cash on hand for the down payment, but not enough to cover closing costs as well. The concession inflates the price to cover the closing costs - the mortgage is based on this inflated price and so the appraisal is as well (bank looking for cover for value of asset that is collateral for the loan). The seller is netting the price less concession and so that is really the value of the home which presents the risk that the appraisal may come up short.

Good luck to you!

Best,
Jeannie Feenick
Search and connect at http://www.feenick.com

Yes it is seller concessions. Money coming back to the buyer usually a negotiation to help the buyer get the house. Some times the price is raised and sometimes not to cover the amount given back. However the concessions can only cover closing costs and at a maximum of 6% of the selling price.
100K 6% concession max = $6k

But I also want to point out that if you live in the property right now and have done so for a year then then and only then can you have additional money given to you back from the seller to use toward down payments.

Larry Sarlo
Weichert Realtors
609-868-1171
LSarlo@comcast.net

MKopie
That is a seller's concession.
So you are offering 10,000 less than full price.
The seller's attorney will cut a 10k check to your attorney to cover the closing costs and that amount will be rolled into the total mortgage amount you are borrowing

You are basicaly offering 10,000 less thaan asking price.

As stated, it means that you have offered $10,000 less than asking price.

It means you offered $90,000.