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Help! I just don't get it. My house is for sale at 450k. Buyer said they will pay the 450k but with $15k for a seller's concession so on paper it will look like the house was sold at 435k and we will get $15k in cash.
BUT does this $15k in cash really benefit the buyer bec. we, the seller, will have to pay the buyer's closing costs, title, etc??. I am trying to figure out if this deal will benefit us. Thanks for any advice.
A $15k seller concession on a $450k sale means you're getting $435k. You won't ever get any cash. They're asking for a discount, probably because they don't have enough money themselves to close. This is a red flag for you & a very weak offer, if the place doesn't appraise at $450k, they won't be able to close (or they'll want an even bigger discount), and you'll have wasted weeks/months of prime selling season with an unqualified buyer. If you've got other offers, I'd look at those. If you need to reduce the price to find a truly qualified buyer, that might be a better option.
This is pretty common. Maybe not so much at that price point, but I also know homes are pricier in NY.
At entry-level price points, offers without this are rare.
A $15k seller concession on a $450k sale means you're getting $435k. You won't ever get any cash. They're asking for a discount, probably because they don't have enough money themselves to close. This is a red flag for you & a very weak offer, if the place doesn't appraise at $450k, they won't be able to close (or they'll want an even bigger discount), and you'll have wasted weeks/months of prime selling season with an unqualified buyer. If you've got other offers, I'd look at those. If you need to reduce the price to find a truly qualified buyer, that might be a better option.
Thanks. It was weird. They offered 405k , were pre approved for 425,00 and I happen to know the buyers have over 75k cash . So when we said no way, they came up with that offer. Having never sold a house, we ar confused and will reach out to a lawyer tomorrow. I mean, if it doesn't benefit us, why do it?
This is pretty common. Maybe not so much at that price point, but I also know homes are pricier in NY.
At entry-level price points, offers without this are rare.
Maybe it's common in a buyer's market, but it's also a great strategy to get less money than the house will appraise for & set yourself up to waste time on the market with an unqualified buyer. Better to lower the price & get a buyer who can afford the deal without a handout - they're more likely to actually close the deal, instead of sending the seller into a spiral of lowered pricing/net return, more days on the market, lower subsequent offers, etc.
The bottom line is, it's a weak offer - the buyer wants something they can't afford & they want the seller to participate in the fantasy of "creative financing" - to the seller, all that means is "taking less money home at closing". In my market, this strategy is actually rare in the entry-level properties, there is plenty of demand and very little product available.
Thanks. It was weird. They offered 405k , were pre approved for 425,00 and I happen to know the buyers have over 75k cash . So when we said no way, they came up with that offer. Having never sold a house, we ar confused and will reach out to a lawyer tomorrow. I mean, if it doesn't benefit us, why do it?
Being "pre approved" for $425k, and actually *having* the cash to close are two different things - at $425k, for 20% down, they'ed need closer to $85k spendable cash. Running your bank account down to zero isn't a great idea if you own a $400k home (what if you need a roof, furnace, or a car repair?).. If they actually *have* $75k in the bank, it sounds like they're trying to not spend all of it.. Which is certainly prudent for them, but the way the offer is structured, I'd expect to get nickeled and dimed by a thousand little cuts until the final/net purchase price is much closer to their original offer of $405k than your listing price of $450k.
Which might be *fine* if you know that as a seller going into it, but lowering your asking price to $435k might get you a qualified buyer without the "death by a thousand price reductions" that they're setting you up for.
Help! I just don't get it. My house is for sale at 450k. Buyer said they will pay the 450k but with $15k for a seller's concession so on paper it will look like the house was sold at 435k and we will get $15k in cash.
BUT does this $15k in cash really benefit the buyer bec. we, the seller, will have to pay the buyer's closing costs, title, etc??. I am trying to figure out if this deal will benefit us. Thanks for any advice.
It will only benefit you if you are having trouble selling, or need to sell quickly. If you can wait around for another buyer or a possible price reduction than pass and wait for another buyer. On paper it will look like the house sold for $450K but you only get $435K minus your costs like realtor and closing fees. Taxes are really high around NYC and Long Island so that's something to keep in mind and a good reason to take $15K less unless you are in a really hot market.
No one can possibly tell you this is a weak or strong offer without knowing the particulars of both sides of the negotiations.
But, I can tell you that historically, in this forum, there is a LOT of superstition promoting kicking qualified buyers away because posters give knee-jerk advice without an understanding of the CC approach.
In this low interest rate environment, the buyer is probably just hoping to borrow more and keep the $15,000 liquid cash in their accounts for other reasons. Maybe they want to have a little extra cash to paint the house, change landscaping, install new flooring. Whatever.
This is very common and just another facet of a negotiation and in recognizing what the other party values and wants.
Qualified buyers close deals every week with a cash boost from the total price.
Think first of your "Net Proceeds from sale." That is the check you collect at closing. It means more than the structure of the deal.
$450,000 - $15,000 in closing costs paid for the buyer = $435,000 NET to you, before YOUR closing costs.
If you don't believe the offer is adequate, make a counter that delivers a better NET to you.
You might say, "We are glad to help with your closing costs. At $460,000 contract price, we can agree to $15,000 in CC for you."
Again, a very, very common situation.
All your negotiations should consider your net proceeds, with secondary focus on how you arrive at that figure. Once you agree on a structure that will deliver you acceptable net proceeds, you need to be reasonably confident that the property will appraise at the contract price, which is inflated a bit to allow the buyer to finance the $15,000 in the deal.
Last edited by MikeJaquish; 02-27-2017 at 05:24 AM..
Help! I just don't get it. My house is for sale at 450k. Buyer said they will pay the 450k but with $15k for a seller's concession so on paper it will look like the house was sold at 435k and we will get $15k in cash.
BUT does this $15k in cash really benefit the buyer bec. we, the seller, will have to pay the buyer's closing costs, title, etc??. I am trying to figure out if this deal will benefit us. Thanks for any advice.
Basically they are asking for is the same as a 3.5% discount off the price of the home. When you price a home you should not expect to get the full amount unless you are in a super hot market in which case you can expect to get more or have time to sit around and wait for another buyer who may not show up for a year.
Do your homework check the listings to see how fast homes sell in your area. If you price on the low end of the spectrum, if so you can sell faster.
Also make sure if you decide to proceed that they show a new preapproval letter for the full $450K. If your home perfect and in the perfect area and highly sought out, if so wait for a different buyer. $450K is a lot of money. It may not buy a lot of home in some areas, but in others you can buy a McMansion or a very nice home on 15 acres in the south.
I'd be suspicious if anybody wants to play any financial hokey pokey.
Common or not common.
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