Buyers need to have money set aside for a down payment and closing costs. If the buyer has been approved for a mortgage AND if his income is high enough to justify a slightly larger mortgage, then a “seller’s concession” might be helpful in covering some of the transaction costs.
The seller’s concession is usually a fixed amount of money which can be as great as 3% (and sometimes more) of the purchase price . This amount gets added to the agreed upon deal price. For example, a $500,000 house could close for $510,000. The additional $10,000 would go towards paying the buyers closing costs. The buyer has a slightly higher mortgage, but the seller still receives the same $500k.
The money from the seller’s concession can be used towards the buyer’s closing costs and even to buy down the interest rate on the mortgage (thus lowering the monthly mortgage payments). If a buyer is interested in a seller’s concession, it’s a good idea to discuss this with the real estate broker before making an offer. The seller would need to agree to this method. Both parties know that the house must appraise for this new price. The seller’s concession is a useful tool in the real estate process. It can be very helpful in getting deals done. Call me. Love, Robin.