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ERA Herman Group Real Estate

Serving Colorado Springs

7 key things to know about seller concessions

7 key things to know about seller concessions

 

(1) What is a seller concession?1000958597

(2) What can a seller concession be used for?

  • It is often used to help pay for the closing cost that  buyers incurs in getting a loan to purchase a property.

(3) Why would I ask for a seller concession?

  • As a buyer, you may have great credit scores and have already gotten approved for a loan from a lender.  But the lender is asking for 20% down, which you have saved, but it’s also going to cost about 3% of the loan for the closing costs.   If you negotiate seller concessions in the contract, it may make the difference in having the financial ability to purchase the home.

(4) How are closing costs for VA and FHA loans different?

  • There are certain costs associated with FHA and VA loan that are called prepaid expenses and the buyer is not allowed to pay for these costs.    Your lender can give your more details about these costs.

(5) Does the lender need to approve the seller concessions?

  • It’s always a great idea to have a conversation with your lender before deciding on how much to ask a seller to pay in seller concessions.  Many loans will only allow a maximum of 3%-6%   in seller concessions to be paid for by the seller.  And nothing is more frustrating than getting a seller to agree to a certain amount of seller concessions and then coming to find out your lender won’t allow you to use all of the amount you have negotiated.

(6) Is it common to ask for seller concessions?

  • This all depends on where you are purchasing a home.  In the Colorado Springs area many buyers ask the sellers for seller concessions, but as the market has started to change to a sellers market, more and more sellers aren’t willing to pay for seller concessions.

(7) Why wouldn’t a seller agree to seller concessions?

  • Remember, all most sellers care about is selling their home for the most value.   And in Colorado Springs, the seller typically is already paying for a commission to sale the house, which can range between 4% and 6%.  And if the buyer is also wanting to negotiate the price of the home plus ask for seller concessions, the seller may not accept the offer without countering.
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