Seller Credits: Playing Footsie Under the Closing Table Or Playing by the Rules?

Not a good idea to do ANYTHING under the table.  Transparency is the word.

Closing costs have always been an issue to consumers. Trying to tell buyers the seller is paying something and they, the buyer, are not paying, has always bothered me.

Here is the way I see it. The final consumer of any product including a house pays everything.
If the buyer wasn't making the purchase there would be no exchange of money and nobody would be paid anything.

The buyer has one concern. How much money is coming out of my Account?
The Seller has one concern. How much money is going in my Account?

The Lenders and or the Government allow the Buyer to finance closing costs if they are written as Seller Paid.

Educating Buyers to the fact they are indeed paying everything no matter how the contract is written is hard and very unpopular, but if you do it, you will never have a problem with the Buyer or the Seller.
You can do a Buyer Net just like a Seller Net and it really help clear things up.

I have used the Seller concession to Buyer extensively, and I find that typically, closing costs run about 2% to 3% and the difference is often the cost of PMI premiums upfront, for example.

I've gone back over old transactions and every time, I've been able to verify that we could use every penny of three percent, if the Seller was willing to conceed to that amount.  These days, however, banks are getting firmer on that, I notice, as the market has tipped back to a more favorable position for them (and I recgnize that other Sellers besides banks are agreeing to this, but banks are the largest contributor).

As a complete departure from this, and more to the Realtors than the lenders reading this, how are you all handling the banks (Sellers) who attempt to reduce your commission on the concessions to Buyers?  I am currently preparing to file a formal complaint and request for disciplinary action against a brokerage who refused to follow the MLS rules against this, after two or more years of having commission reductions made unilaterally by banks. More on this later, perhaps?

Ha...love the picture.  

Yes, every penny spent and to whom is on the HUD statement . We can't hide what we got and where we got it.

Thanks for the post today.

Patricia AUlson/Portsmouth nh real estate

Thank you SO SO much for writing this article!!!!  My partner and I are first-time homebuyers, and just today decided to make an offer on a bank-owned property in Oakland.  Long story short is that as we were meeting with our realtor to sign disclosures, write EM check, and make offer letter, we stumbled over some very confusing issues about seller credits--confusing enough for us to stop the proceedings until we can get a handle on it all.  I found your article by googling "seller credit to buyer california," and it has been the clearest, most straightforward, most useful item I've read on the subject (and I've already plowed throught the mountain of books I've checked out about the process).  Really, your post has been a great service to us laypeople out there just trying to claim a little piece of home in the craziness that is Bay Area real estate!  Thank you again!

Great article. We're in escrow and are trying to figure out how to use a $12k credit from the seller for a new roof. Initially our bank (Wells) said it wouldn't be a problem. Now they say we can only use it toward non-recurring closing cost which will only be about half the amount of the credit. Thanks for explaining the details. I wish lenders could be held responsible for their bait and switch tactics.