If I pay $100 for the house and the seller gives me a 6% credit then the seller nets $94.
The effect on the seller is the same under either scenario. The question is: what difference does each scenario make to you?
If you pay less, you need a smaller loan, your payments will be less and you overall interest cost will be less. If you pay more, but get the credit, your loan will be larger, your monthly payments will be larger and your overall interest cost will be higher. Both scenarios assume the same percentage of down payment vs. purchase price.
If you can afford the closing cost, paying a lower price seems like a better way to go. If you are struggling to come up with the cash for the closing costs, maybe the credit is best for you. Also, after the close, you may need additional cash for repairs, new flooring, new paint, appliances, and furniture. Maybe having the seller pay your closing costs allows you to save your cash for other things.
Neither and both. First, if you need closing cost assistance, meet with a lender and find out how much you need. In most cases if you request more than you can use, it goes back to the seller.
Next, have your agent do a Comparable Market Analysis of the home to determine the real value. List price is not necessarily the market value. If they are overpriced a 6% discount (however it's divided) may not be enough. If it's underpriced, you'll likely get beat out by another bidder.
Once you know what the market price should be, discuss your closing costs need with your agent and decide on a strategy to get the best deal on the house. Chances are you'll need to do some closing cost help and discounted price. To the seller, all they care about is the net proceeds they get out of the deal. All concessions, price, closing costs, repairs are discounts to the seller.
If you don't have the funds, then it's a moot point, as you will need to ask to have them included in your offer as a seller's concession (if your lender will allow it).
Who says you need to pay list price in order to get a concession?
You really need to take a look at comps and see what the house s worth....to you..then play with the numbers any way you want.
It's really going to depend on what the properties value is. I agree with others, what if the properties value is not where it's listed. A market analysis should be completed on the property and your local Real Estate expert can assist you with. Most buyers are requesting a closing cost credit in today's market. We would need to have you meet with a mortgage representative and determine what your approved for and how much closing cost assistance you would need. That should be the first step prior to looking at properties. Once that's determined, you can start to look at potential properties meeting the pricing criteria and any other criteria that would be of interest.
Give me a call with any questions you may have.
The answer to your question depends on what you feel more comfortable with:
1. Do you need assistance from the seller to help you with the closing costs as you are stretching your budget thin after coming up with the total down payment due or...
2. Would you rather pay your own closing costs and get the property for less money thus possibly lowering the amount you would finance?
Just food for thought.
Good luck to you!
Prudential Connecticut Realty