Skyline, Home Buyer in Downingtown, PA

The seller is offering me a 3% seller assist, and how they do that is by adding it to my sales price.

Asked by Skyline, Downingtown, PA Thu Mar 12, 2009

The seller is offering me a 3% seller assist, and how they do that is by adding it to my sales price. My question is since now I have a bigger sales price or bigger loan amount, will I end up paying more fees and a bigger mortgage payment?

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9
Raylene Lewis, Agent, College Station, TX
Thu Mar 12, 2009
The first thing you need to consider is if the home will appraise for the new sales price. You don't want to have paid for inspections and other costs only to find out after 500+ dollars in expenses that a lender will not provide you with a loan on that particular home at the price you agreed to. "Will I end up paying more fees?" the answer to that question is that it depends. If the seller is paying the title policy then no, if you are then YES as the sales price determines the price of the title policy. My guess is that the difference should be no more than 40 - 60 dollars, but it really depends on what state you live in and what the Title Policy regulated prices are. The amount is probably minimal. The answer to a "Bigger Mortgage Payment" is YES too. But as I assume we are only talking about 4 or so thousand dollars, the increase in monthly payment would again be small. Another option you should consider is potentially having the seller use the contribution to buy down your interest rate. This would mean you pay less per month. Another consideration if you do not need the 3 percent is to simply have the seller reduce the sales price by that amount.
Good Luck and Happy Buying!
2 votes
Neil and Kat…, Agent, West Chester, PA
Fri Mar 13, 2009
Skyline,

The way you are describing the Seller "offering you a 3% seller assist" to be clear means the Seller is offering you nothing of value. You are correct in that what the Seller is allowing you to do is finance your closing costs, as long as the property still appraises for the increase over asking price. This of course does mean that you will be paying interest on as well as closing costs on this increased sales price. On top of that depending on where the property is located the asking price may already be higher than it should be, since a lot of the Downingtown area is a softer market at present. If you are not currently working with a Buyer's agent I would suggest you pull back from this and get yourself a Buyers agent skilled in financing, thinking outside of the box, and negotiating to look out for your fiduciary interests. My office is in Exton and my wife and I are extremely knowledgeable in exactly what is happening in that market as to prices/values. Feel free to give us a call or shoot us an email.

Neil
Web Reference:  http://www.EveryHomeInPA.com
1 vote
Erica Ramus,…, Agent, Pottsville, PA
Sat Feb 19, 2011
Yes, they just inflated your price 3%. Now the property has to appraise for 3% more. And yes you probably will pay more in fees. You are borrowing more, too, so you'll pay more over the longterm.

Ask your lender to explain, and/or your real estate agent.
0 votes
Heather Thom…, Agent, Kenosha, WI
Fri Feb 18, 2011
In Wisconsin and Illinois this is not allowed. It is mortgage fraud. That is a partial reason "the market" took the dive that it did. When you increase the sales price to "help" a buyer/seller, it then skews all information on that sale. Little by little it pushes market values up on homes and we find ourselves back to what we are trying to dig ourselves out of now.
0 votes
Chris & Step…, Agent, Philadelphia, PA
Fri Mar 13, 2009
Skyline,

The seller may 1) add it to their sales price or the seller may 2) accept your offer price and deduct it from their "net" proceeds.

Let's use the exmple of of a flat number such as $3,000 for your seller's assist and $100,000 for the price of the property.

Example: 1
$100,000 Listing Price + $3,000 Seller's Assist =
$103,000 as the price you will pay for the property
$100,000 is the "net " number to the seller

Example 2
$100,000 Listing Price - $3,000 Sellers Assist =
$100,000 as the price you pay for the property
$97,000 is the "net" to the seller

In Philadelphia your closing costs will be about 5%-6% of the sales price so let's use 5% to see what the difference between the two scenatios would cost you.

$103,000 x 5% = $5,150
$100,000 x 5% = $5,000
Total difference is $150

The difference on a mortgage payment for a $100,000 home compared to a $103,000 is only $15 bucks a month. I am guessing on that.

Off subject, it is Philadelphia Beer Week and I see youare from Downingtown. We had Victory Brewing Company visit or neighborhood to host a Beer tasting at the Foodery last night. it has been years but I visited Downingtown. But I did visit one time to check out the Victory Restaurant. I had a great time there.

Hope this helps
0 votes
Bill Eckler, Agent, Venice, FL
Fri Mar 13, 2009
Skyline,

It would be fair to assume your thoughts are correct. Additionally, it would be fair to assume it would impact your taxes as well.

Good luck
0 votes
Nick & Trudy…, Agent, Devon, PA
Fri Mar 13, 2009
Skyline the simple answer is yes your transfer tax will be slightly higher, your title costs will be slightly higher etc. But the seller assist can be used toward closing costs, so it will save you money leaving cash in your pocket or to use towards your down payment, or as was said below to buy down your rate. Most mortgage companies will not allow the seller assist to be greater than a certain amount and it must be shown on the HUD form at settlement as well, so make sure your mortgage broker is aware of the assist and checks with the mortgage company to verify that it is allowed and get that in writing so there are no surprises at settlement.
Web Reference:  http://www.VandekarTeam.com
0 votes
Jeff K, Home Buyer, Bristol, PA
Fri Mar 13, 2009
While I can't add anything to the others, or validate their info for you in PA - you may wish to consider if bi-weekly payments will make sense for your situation. Here's a site with good info for your perusal:

http://www.bankrate.com/brm/news/mtg/20010920a.asp
0 votes
Chris Suarez…, Mortgage Broker Or Lender, Spring Hill, FL
Thu Mar 12, 2009
With a conventional loan, a seller cannot contribute towards your downpayment. Normally, they would want to re-coupe their monies so they would incorporate it in the price. You would need to talk to your Realtor about it. They should be able to explain but, you do need to find out if the seller is even "allowed" to give you anything towards down payment (unless they are family).

Chris Suarez
Web Reference:  http://SuarezHomeFinance.com
0 votes
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