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Price Reduction or Seller Concession? Which is better?

By
Mortgage and Lending with FAIRWAY Independent Mortgage Corp

Should your buyer negotiate the price or a seller concession?  (of course the answer varies from client to client), however, most buyers might be surprised at how a seller concession could help their overall financing plan.

Click here for some quick numbers with a sample FHA home...

Ken Pederson
Certified Mortgage Planner,
FAIRWAY Independent Mortgage Corp.
Lancaster, PA
mortgages

nmls: 134943

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Comments (5)

Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

Seller's shouldn't care as long as their bottom line is the same, and as for the buyers, it depends on their goals. Some like to "finance" their closing costs and pay small amounts over their 30 year mortgage, while others rather pay them cash at closing.

May 17, 2010 12:17 PM
Lewis Poretz
Apex Home Loans - Annapolis, MD
Business Development Manager

I agree Donna -  this is the year 2010.... with so many consumers upside down and homes for sale sitting for months, as long as both buyer and seller are happy with the bottom line it really is a non factor....   in general....

May 18, 2010 02:41 PM
Ken Pederson
FAIRWAY Independent Mortgage Corp - Lancaster, PA
Certified Mortgage Planner

As mentioned, you are both correct.  However, if you look a little closer and think thru this... isn't the rate reduction a more effective financing plan for the buyer AND isn't that a good marketing tool for the listing agent and seller? 

May 19, 2010 12:58 AM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

It really comes down to available LIQUID money available from the buyer. Many times Seller assist is necessary to make the deal go. I do see the others point about not starting out @ 100+% of the property value tho !

May 19, 2010 05:32 AM
Anonymous
Ken

Hi Mike,

Concur totally.  If the buyers needs the concession to cover closing costs, this is a moot point.  However, when funds are available, even with a 20% down payment scenario... negotiating the lower rate, if properly structured, is typically a better financial picture for the buyer.   And if you look at a conventional loan with PMI, then a seller concession can make an even bigger difference by getting rid of the PMI totally.  That's a HUGE benefit to the buyer. 

May 19, 2010 05:42 AM
#5