http://activerain.com/blogs/bartoni en-us http://activerain.com/blogsview/810016/home-buyer-leverage-with-seller-concessions <p>It is often more beneficial to the buyer to obtain a "seller concession" towards the buyer's closing cost than a further sales price reduction in today's market.&nbsp; This is a very effective buyer's tool that is alll too often forgotten and not used in the purchase negotiations.&nbsp; On a conventional loan, the seller may credit the buyer's&nbsp;costs up to 6% of the closing costs.&nbsp; The same holds true on an FHA loan.&nbsp; On a VA loan, the seller may credit up to 4% of the sales price.&nbsp; <strong>The seller's concession towards the buyer's closing costs and mortgage interet rate is especially relevant when the buyer's debts and income can only qualify the buyer for a set loan payment.&nbsp; </strong>The key here is that the concession can be used <strong>to "buy down" the interest rate</strong> to qualify the buyer when a simple sales price reduction in the same amount as a concession towards the buyer's closing costs may not.&nbsp;&nbsp;</p> <p>Example:</p> <p>Sales Price:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;$550,000</p> <p>Down Payment:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $110,000 (20%)</p> <p>Loan amount/payment:&nbsp;&nbsp;&nbsp;$$440,000&nbsp;at 6% interest= $2,638.00/mo.</p> <p>A price reduction of 6% of the sales price ($33,000) would create a sales&nbsp;price of $517,000 and an 80% loan amount of $413,600. At an interest rate of 6%, the principle and interest monthly payment would be $2,479.&nbsp; If the sale price was kept at $550,000 and the seller agreed to a 6% of the sales price concession ($33,000), the buyer's total closing cost would be paid (approx. $8,000) and the left over $25,000 could be used to buy down the buyer's interest rate to 4.50% in today's interest rate environment.&nbsp; The principle and interest monthly payment on the $440,000 loan amount would then be $2,229.</p> <p><strong>CONCLUSION:</strong>&nbsp;The seller concession towards the buyer's closing cost of $33,000 created a loan payment for the buyer of $250 less than if the seller had simply agreed to a sale price reduction of $33,000.&nbsp; This could easily be the&nbsp;difference between the buyer qualifying and not.&nbsp; In today's market sellers are willing to consider a lot of creative&nbsp;options to sell their property.&nbsp; Try this out...it works! &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> Larry Barton (Century 21 All Islands) Wed, 26 Nov 2008 19:25:40 -0800 http://activerain.com/blogsview/810016/home-buyer-leverage-with-seller-concessions