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seller concessions for repairs

By December 11, 2020 Latest News No Comments

The buyer’s mortgage lender may not approve a mortgage on a home that needs a major structural repair. Just like seasonal sales offer retail shoppers a little something extra for their purchase, so do concessions in real estate. In the contract, you can make the sale contingent upon the seller setting money aside from the proceeds of the sale for the repairs. A portion of the seller's proceeds can be held in trust after closing and used to pay for repairs. Whether they pay the closing costs out of their pocket, or give you the cash at the closing table- you still only need $10,000 at closing.   Should your concessions exceed 6%, it will result in a dollar-for-dollar reduction to your home loan purchase price. The amount is usually computed at 1.5 times the estimated cost. However, used incorrectly, offers for concessions can backfire. Consider this: In some market areas, it is customary for sellers to pay for, and provide to the buyer at closing, a current plat of survey. Hopefully, they’ll listen and agree to make repairs. The obvious concession to ask for when repairs are required is to for the seller to lower the price of the house. The seller’s agent will point this out to them. This is why your purchase agreement stated that the offer was contingent upon inspection. You’re able to use $21,000 in seller concessions — if the seller … You don't necessarily have to ask for the full amount of the repairs, though. The seller gives the buyer a lump sum at closing to cover the cost of repairs, which the buyer agrees to carry out. The seller knows you are a bit uncertain, and offers you $5,000 to pay the closing costs. If the asking price is $200k, and the repairs will run $10k, you might ask for only $5k off the asking price. A Concession for Repairs: Let’s say you’re negotiating with the same seller on a deal. Concessions are incentives that you as a seller offer to buyers to sweeten the pot, such as paying certain fees at closing or offering money for needed repairs. This seller paid item is present in the market as a “result of tradition or law” and is found in “virtually all sales transactions”: yesterday, today, and, most likely, tomorrow. A seller’s concession is an amount of money paid toward closing on your behalf. Consider this example: Say you’re financing a $350,000 home. Some sellers, however, are just stubborn. What are Seller’s Concessions? You get the repair made without having to pay for it, and the seller gets to sell the house and make the repair without spending any up-front money. Request repairs: The buyer may request that the seller complete a list of requested repairs, as a condition of the sale moving forward. During negotiations, the buyer works with the seller or their agent to come to an agreeable amount of money the seller … The seller prepays a contractor to do the work. Ask for a credit: The buyer may request a credit (also called a concession), in an amount that’s enough to cover the repairs. Other times, a buyer may add in a request for seller concessions later in the process to offset the costs of any necessary repairs the inspection uncovers. The FHA limits seller concessions to 6% of the loan amount. Nor can seller concessions be used for the down payment, home repairs, new appliances, or for any other purpose than to pay for closing costs shown on the final loan documents. Generally, this money is used to pay for closing costs, but sellers occasionally concede money if they realize their carpets are gross and need to be replaced or that their garage needs repairs they don’t really want to make. This setup can be a huge win-win for everyone. How Do Seller Concessions Work? 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