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Old 01-08-2007, 06:52 PM
 
15 posts, read 135,484 times
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Default What does 6% in seller concessions mean exactly?

I'm trying to sell my home & received the following offer: $295k (asking $299k), no money down (100% financing), and the potential buyers want me to pay 6% towards their closing costs (6% in seller concessions). Is this typical? 6% seems like an awful lot of money. I don't think they're putting any type of good faith deposit down either. I'm not in a hurry to sell. The home has been on the market less than a month, but this is my first time selling & I've never heard of a seller paying 6% in closing costs in addition to the 5% I'm paying in commissions.
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Old 01-08-2007, 07:05 PM
 
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I did a simliar offer on the house that I bought. Yes, 6% is HIGH. That's $17700! Is the house overpriced? If not, then this offer is bad. You can counter it with something a lot better for you, but you're probably better off rejecting it.

Yes, sellers can pay closing costs and such if it was negotiated that way. For example, my house was offered at $299,900. I offered $300,000 with $5000 back at closing (for closing costs). So that is a net $295,000 for the sellers, not bad for our market at the time. That's less than 2% back. How much are the closings cost where you live?? Mine was only $6000 for the same price here in AZ.

This type of thing is for people who have nothing down and nothing for closing costs. Not the best way to buy a house, but sometimes it's all we can do at the time. I guess we were lucky that someone accepted it, as we were always competing with people from out of state with lots of money.

Figuring in the commission doesn't matter either, that's YOUR cost for YOU to sell your house, otherwise you could save that and sell it yourself.

I would tell their realtor to look at houses that they can afford.
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Old 01-08-2007, 09:37 PM
 
Location: Tennessee
1,459 posts, read 2,973,069 times
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Quote:
Originally Posted by babyv7 View Post
I'm trying to sell my home & received the following offer: $295k (asking $299k), no money down (100% financing), and the potential buyers want me to pay 6% towards their closing costs (6% in seller concessions). Is this typical? 6% seems like an awful lot of money. I don't think they're putting any type of good faith deposit down either. I'm not in a hurry to sell. The home has been on the market less than a month, but this is my first time selling & I've never heard of a seller paying 6% in closing costs in addition to the 5% I'm paying in commissions.

No way would I pay 6%, I would pay the seller fees and let them pay the buyer fees... that's the way I sold my house in Florida. If you pay 6% you're getting ripped off IMO.
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Old 01-09-2007, 12:57 PM
 
Location: Burlington VT
1,405 posts, read 3,253,519 times
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Quote:
Originally Posted by babyv7 View Post
I'm trying to sell my home & received the following offer: $295k (asking $299k), no money down (100% financing), and the potential buyers want me to pay 6% towards their closing costs (6% in seller concessions). Is this typical? 6% seems like an awful lot of money. I don't think they're putting any type of good faith deposit down either. I'm not in a hurry to sell. The home has been on the market less than a month, but this is my first time selling & I've never heard of a seller paying 6% in closing costs in addition to the 5% I'm paying in commissions.
I'm a Realtor. But I'm in another state and this shouldn't be construed as professional advice. Your own Realtor will have better advice for you. So will your Real Estate Attorney. If you haven't chosen one yet, your Realtor can suggest one - unless you are in a Title Company State. In my state, buyers and sellers use attorneys. I only recommend attorneys who specialize in RE purchases and sales and who charge a flat fee.

I can only offer some general observations, - and without more information all I can do is ask the sort of questions experience suggests.

But for starters - You say you've received an offer, but you don't "think" they are putting down a good faith deposit. I'm guessing this means the offer is not written down. If I'm correct about that, you might simply begin by asking for a written offer with an earnest money deposit, as well as a pre-approval from a Mortgage Lender. Whenever I recieve a verbal offer on a listing of mine, I immediately telephone my seller clients and relay it and encourage them to instruct me to respond by asking for the whole thing in writing. The more detail, and supporting information, the better.

Here's another question: Does the lender typically offer this sort of mortgage these days: 100% financing with 6% concession to the purchaser? Is there a letter from the mortgage lender? Why not call the mortgage originator and ask? Or ask your Realtor for the name of a lender who can speak with you about whether or not Mortgages on these terms are even being written in your area right now...Might this offer have been written / proposed by somebody not familiar with the current underwriting guidelines? Like perhaps a new agent?

Next - The obvious question is (I'm not looking for an answer here - just suggesting this is a crucial issue) What's the house worth? What's it's fair market value. Not the town tax asessment, not the neighbor's opinion - not what you plan to do with the money....the fair market value.
In addition to the obvious reasons for knowing this - you'll want to consider the virtual certainty that when you do see the fine print on this offer, it'll have a clause in it requiring that the house appraise at or above sale price. And yes - the appraiser is almost certain to have a copy of the offer with all the details spelled out.

Also - How's the market in your neighborhood?
What does your Realtor have to say about the value of your home VS what you'd NET on the offer of you closed on those terms?

I'm going to guess you think your home is worth more than the offer would bring. Knowing as little as I do about the specific details - I'd say that in a similar situation I'd be sorely tempted to do some bargaining:
The prospective purchasers as asking you to pay a lot of closing costs AND take the risk that they'd fully qualify and be able to close for 100% of the value? It seems a lot to ask - except that I don't know enough about your specific neighborhood market. How many homes like yours SOLD during December,January,February of last year? What sort of concessions did the seller concede? How much did the sellers net? Your Realtor can give you this information right straight out of the MLS and it's very important information for you, I should think.

IF the prospective buyers can give you some reassurance that they are qualified as to credit, debt, and ratios - why not bargain with them - make them a counter offer? That's what I'd be counseling me sellers to do.

I have more questions than ideas really - but I hope this is helpful none the less.

Good luck!
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Old 01-09-2007, 01:32 PM
 
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Great advice from Chaz. I'm not a realtor but would consider the price of the house, the overall market and likelihood of having to lower the price a few months down the road, and possibly counter with an offer of one percent closing costs. People are trying to lowball sellers these days.

Also, don't forget that whatever concessions you make, the selling price won't necessarily reflect them. That's why sellers/builders offer incentives like a new car or a trip to buyers. Even though that car or trip may cost 20k, they can still say they sold the house at a certain price which doesn't reflect that out-of-pocket expense.
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Old 01-09-2007, 01:56 PM
 
Location: Burlington VT
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Quote:
Originally Posted by ExNYC View Post
Great advice from Chaz. I'm not a realtor but would consider the price of the house, the overall market and likelihood of having to lower the price a few months down the road, and possibly counter with an offer of one percent closing costs. People are trying to lowball sellers these days.

Also, don't forget that whatever concessions you make, the selling price won't necessarily reflect them. That's why sellers/builders offer incentives like a new car or a trip to buyers. Even though that car or trip may cost 20k, they can still say they sold the house at a certain price which doesn't reflect that out-of-pocket expense.
That's a terrific point you make. And thanks for the kind words...

And you're absolutely right about the concessions. That's why I value the hard MLS data I pay so dearly for: I can tell clients exactly what a given home sold for AS WELL as exactly how much the seller paid to assist the buyers with closing costs, remediate radon, fix the roof or whatever was negotiated.
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Old 01-09-2007, 02:00 PM
 
Location: Colorado
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We offered $5000 help with closing costs, 6% is way to high.
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Old 01-11-2007, 03:24 PM
 
Location: Coachella Valley, California
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Don't Do It!!!!!!!!!!
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Old 02-14-2007, 04:30 PM
 
1 posts, read 43,100 times
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Quote:
Originally Posted by chaz longue View Post
That's a terrific point you make. And thanks for the kind words...

And you're absolutely right about the concessions. That's why I value the hard MLS data I pay so dearly for: I can tell clients exactly what a given home sold for AS WELL as exactly how much the seller paid to assist the buyers with closing costs, remediate radon, fix the roof or whatever was negotiated.
Please explain how can you get "how much the seller paid to assist the buyers with closing costs, remediate radon, fix the roof or whatever was negotiated" from MLS data: you can only see there a sales history with the List and Sale price, not the details of who paid fro what.. Thanks!
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Old 02-16-2007, 08:31 AM
 
Location: Burlington VT
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You can't see this information as a member of the public. You'll need a local Realtor who's a member of the MLS.

I pay about $1,100 dollars a year for this proprietary information. When I look up a sold property in my MLS system, it tells me all sorts of things (original list price, list price at the time the property went under deposit, number of days on market, dollar value of seller concession if any, seller disclosures of various sorts, type of financing, etc etc etc etc) which simply aren't available to the public - even by physically inspecting the town records. There are whole collections of documents that are only available to the sellers, the buyers and the Realtors who subscribe/belong to the MLS and the attorneys involved in the closing...if it's an "attorney state". If I need additional data (for instance, the dollar breakdown of what the concessions were paid in consideration of, or the details of the financing) I call the Realtors or mortgage loan officers involved.

People understandably tend to think the details of real estate transactions can just be pulled up on the 'net, as, say, the Grand List in Burlington VT can be. But it's not so.
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