Seller's Concession (real estate, mortgage, how much)

[azwildcats70]

On a sellers concession... can someone tell me if this is correct?

The purchase price of the home is artificially inflated to account for closing costs... meaning...

If the agreed purchase price is $470,000 with a 4% sellers concession, the inflated purchase price would be $488,800. So if closing costs end up being less, that's more money for the seller, correct?

$488,800 purchase price.
$18,800 closing costs at 4%
$470,000 NET to seller


$488,800 purchase price
$14,100 closing costs at 3%
$474,700 NET to seller

Is that right?

[CuCullin]

No, the price is the price, the concession is taken off of that - it doesn't have to be artificially inflated.

Also, if the concession is simply a concession, the total amount goes to the buyer. So if there is $20k in concession, $18k in actual costs, $2k then goes to the buyers side as a portion of the money down or a check paid to the buyer (as long as mortgage conditions are met - you can get money from someone else (the seller) as your downpayment money, but with a minimum percentage out of your own pocket to meet the laid out mortgage req's).

If a seller inflates their purchase price to incorporate these amounts, or works off a set percentage, or otherwise documents that this money is a seller's concession of closing costs only, and is not to be used towards downpayment money or otherwise, yes, it could work that way.

Its a legal game, really. Is someone trying to do this in a house you're looking at?

Btw... lawyer = priceless. There are two types of lawyers.... the ones that make the deal, and the ones that break the deal. Both are useful, its important to know which you have

[IntheBurbs]

It does not need to come off the top. For example, you can offer $450K but put in a seller's concession of $5K. If the seller accepts, they are agreeing to your numbers, and you maintain that $450K purchase price. If it is a set amount, there is less confusion because you know that a specific amount - $5K in this case - will be coming back to the buyer, regardless of how much the actual closing costs are.

Generally, when people inflate the price to compensate for concessions, it is because the buyer needs it to be that way (basically, they are financing their closing costs) and the owner is not willing to accept less.

[DodgeViper01]

One must also keep in mind that in today's market, Sellers Concessions are pretty rare because rarely do the homes appraise for much more than the net to the sellers. With appraisers today, sellers concessions raise red flags. Appraisers are very strict today and as a result, sellers concessions are slim to none, especially one higher priced homes.

[jubileefd]

Sorry for repeat post, but I'm curious what closing costs (roughly) are in a NJ real estate sale. Is it really 3-6%? We are in final stages and I had not assumed such a high closing. (for example, a house that is 600K would have closing of at least 18000? Yikes..)

[DodgeViper01]

The most important component are the prepayment of taxes. Once you find that out, you can pretty much figure out what the cost will be for your closing costs as everything else is pretty standard (attorneys fees $1000, etc.)

[azwildcats70]

From what I gather, they are high here in NJ. This is the first time I have bought a house... and barring our down payment, we are strapped for $$$ since having paid cash for our destination wedding in April. EEK!