Home Selling in 07860>Question Details

Tedvalliere, Home Seller in 07860

I am in the process of selling my house. what is the advantage of offering money towards closing versus reducing the price?

Asked by Tedvalliere, 07860 Sat May 29, 2010

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Many buyers don't have the money needed for closing costs, so this is a big incentive to them. It could help sell your house over the competitor who does not offer to pay the buyer closing costs. As the seller it's a wash, you still net the same amount at closing.
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1 vote Thank Flag Link Tue Jun 1, 2010
Here is my advice - if you are not getting showings or offers, you've got a pricing issue. Recommend you lower the price to attract the buyers. If you are getting showings and turning away offers because buyers are not in the position to cover closing costs, then go back to those buyers and offer to consider a seller's concession to cover them.

Here is the wrinkle with seller's concessions - your price is the net, but the purchase price on the face of the contract and for the appraiser/bank is the price grossed up to include the concession. The home must appraise to cover that higher price. Essentially, the concession is allowing the buyer to finance the closing costs. So the issue can be that it may "strain" the appraisal.

There is a possibility then that your home may appraise adequately to cover your net, but not the price with the concession, and then you'd be at a decision point - either reduce your gross price and with it your net, or lose the buyer. That can be a tough nut to swallow.


Good luck to you,
Jeanne Feenick
Unwavering Commitment to Service, Unsurpassed Results
0 votes Thank Flag Link Sat Jun 30, 2012
I hope you've sold you home by now! But I was very surprised how many realtors recommended offering a sellers concession over reducing the price. Price is the ultimate amenity. Buyer's will not look at your home if it is slightly out of their price range; but sometimes a small price reduction can make a big difference. One of my clients just reduced their home from $324,900 to $314,900. Before the reduction there was no serious buyer interest in the first month we had it listed. Within a week of the price reduction we had a bidding war.

Offering a sellers' concession upfront is basically a hidden price reduction. The offer of a sellers concession wont be as noticeable on websites or other advertising. Buyer's ask for sellers concessions all the time so they can finance their closing costs. When they decide to write up an offer on your home they can ask for a sellers concession if they need one.

Best Regards,

Ray Erins
Weichert Realtors
(973) 903-2862
0 votes Thank Flag Link Fri Jun 29, 2012
In my area most buyers DO need closing costs. Even if you lower the price the odds are that the buyer is going to ask for closing costs anyway. I would recommend offering closing costs over lowering the price. My two cents. Good luck to you!
0 votes Thank Flag Link Wed Jan 12, 2011
I agree with many of the responses below. Offering a seller concession towards closing costs is the best way to attract a larger pool of buyers especially those who have good credit, can qualify for a larger mortgage amount and typically don't have enough cash for closing costs and down payment. But also be aware that the amount of the concession is added to the actual sale price of the home which in some cases may cause the house to not appraise. In the current real estate market that may be a potential problem which should be addressed up front.
0 votes Thank Flag Link Wed Jan 12, 2011
I am currently writing up a contract for a first time homebuyer, they do not have downpayment plus closing cost ...as we say "cash poor". But they can afford the higher monthly payment...so we are asking for seller concession, up to 3% of the purchase price and 3.5% down going FHA. The seller's may or may not understand this process but with the right explanation it will be clear to them that the buyer does not have enough cash to purchase without financing it thru there mortgage. The net is still the same for sellers just as long as the buyers can afford it.

Seller concessions are used all the time in our area, especially for first time buyers!

Colleen McMahon
Century 21 Crest
Pompton Plains Office
973-646-7419
0 votes Thank Flag Link Fri Jun 4, 2010
Was that supposed to answer the question, Lorna?
0 votes Thank Flag Link Fri Jun 4, 2010
The buyer will ask for closing costs if they need it. Price it right and get buyers in to look at your property.
0 votes Thank Flag Link Fri Jun 4, 2010
The buyer will ask for closing costs if they need it. Price it right and get buyers in to look at your property.
0 votes Thank Flag Link Fri Jun 4, 2010
Tedvalliere - I agree with Jerry (TU!) Most sellers do not understand that when you reduce your price by $10,000 it lowers a Potential Buyer's monthly payment by ONLY $53.00. That doesn't really increase your market potential.

Financial Incentives create multiple options which help to expand your pool of Qualified Buyers! If Financial Incentives weren't a powerful marketing tool why would Builders offer incentives? Why are Fannie Mae and Freddie Mac offering incentives on their REOs? Because the lure of the prize is often the catalyst for the sale!

If you would like to learn more - Please read:
http://www.trulia.com/blog/barbara_q/2010/06/3_keys_to_selli…

Thank You for your consideration!
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0 votes Thank Flag Link Fri Jun 4, 2010
There is no advantage, in my opinion, to offering closing costs. The buyer can always ask for them, anyway,

What you want to do is draw in buyers to LOOK at your home.....a lower list price will do that faster than offering buyer incentives.
Increase the buyer traffic with a competitive price! Reduce the price!!

Good luck!

Debbie Rose
Prudential NJ Properties
0 votes Thank Flag Link Sat May 29, 2010
Tedvalliere,

Seller concessions just is on paper, If the buyer needs help with covering closing cost you can say

seller to contribute $3,000 towards closing cost .but the buyer has to be able to qualify for that amount since it's wrapped up into the mortgage.
No buyer can receive any cash at closing unless it's a specific loan, 203k, construction loan.


Best advice, price your home at today's value. If you're motivated to sell and the price is right, buyer's will know, they're very educated about recent home sales in your area.

Good Luck!
Colleen McMahon
Century 21 Crest
Pompton Plains NJ

973-646-7419
0 votes Thank Flag Link Sat May 29, 2010
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