Seller Concessions in Contracts.
Let’s start by defining Seller concessions. Seller concessions are generally a financial contribution from the seller to be applied to some of the pre-paids and closing costs for a buyer who is acquiring a loan to purchase property. In recent years this has been a common practice, particularly for buyers who were purchasing foreclosure property. The banks were willing to contribute a certain percentage to those costs to facilitate a quick sale and disposition of the asset. Lenders who were originating loans for buyers encouraged them to ask for those contributions and understandably, since they knew the banks were willing to pay them.
However, with the foreclosure market drying up, buyers are now making offers on properties that are privately owned, not bank owned, and the sellers are not as open to paying those costs for the buyers. They don’t feel they should have to pay them since they are already taking less than they would like for their properties. While the lenders may still be encouraging buyers to ask for them, if you don’t need them, don’t ask.
The reason is really pretty simple. There aren’t as many homes on the market and the sellers know that even if they lose your offer, there is likely to be another coming along very soon. Sellers are just coming out of a tough time too. Many may just have regained enough value in their properties to sell them at a slight profit or at the very least get them out from under their existing mortgages. They may not have a lot of room to negotiate those terms, even if it means losing the sale.
There are loan products like FHA and VA that require some contribution from the seller. Fees that the buyer cannot pay. However they aren’t terribly high so try and confine your requests to the amount needed, not more. This will mean your chances of getting your offer accepted is greatly increased. Sellers who are open to these types of loans, and not all will accept Government loans, are prepared for those minimal costs. Depending on their circumstances though, they may not be willing to accept an offer that asks for more than the minimum contribution.
The market conditions are changing constantly and what was true a year ago, even six months ago, may no longer be true. With the shift from the foreclosure market to a private market, so too have the offer requirement to be sure your offer is looked on favorably. Buying or Selling a piece of property is a cooperative effort. The objective is to have both parties get what they want. The buyers want to buy and the sellers want to sell. Working for the best terms possible for both parties will facilitate a smoother transaction. Both parties come out winners in the end.
Thanks for reading, until next time……
Sandra Paulow, Associate Broker, GRI, SFR, REALTOR® 928.242.0300