Frequently asked question: What is a seller assist?
When writing an agreement of sale or as many people refer to it making an offer on a home, there are many different terms, in both senses of the word, to the contract you are drawing up. Terms such as contingencies, and seller assist. All of these terms are negotiable. So as a buyer you draw up an agreement that is favorable to you, but which at the same time is of interest to the seller. During negotiations, some terms of the agreement will be adjusted such as price, deposits, inspection periods and settlement dates for example.
One of these negotiable terms is a seller assist. Usually a mortgage company will allow you a certain amount of assistance in buying a home from the seller. This can range from 3 to 6 % of the purchase price and usually cannot total more than the allowed closing costs. A Seller Assist reduces the amount of money a buyer needs to buy a house because some of the money is being provided by the seller. However, you must realize this seller assist affects how much the seller receives after paying their own closing costs.
For example, you are buying an apartment say for $100,000. The seller has a mortgage of $75,000 to pay off, plus a commission to the agents involved in the transaction of $6,000, plus a transfer tax of $1,000. So the seller in this example is netting $18,000. (100,000 - 82,000).
Now lets include a seller assist of 4% in this example, this is another $4,000 so now the seller nets $14,000 rather than $18,000. In our example it seems the seller can afford to offer this assist, but remember they also may be purchasing another home for which they need a larger down payment. Or they may have a larger mortgage than we selected in our example.
There are many things that affect a sellers ability and willingness to accept a seller assist in an offer. Imagine this apartment was under-priced and therefore there are multiple offers. If the other offers are the same as the buyer using a seller assist and do not include the seller assist they net the seller a higher amount and therefore are more attractive. An alternative then is to make a higher offer with a seller assist so the seller is not so affected by the assist. If the apartment was truly under-priced then it will still appraise and the deal can move ahead to settlement. Here we have two examples where other factors can affect an assist, multiple offers and the appraisal.
Another example where a seller may not be willing to offer an assist is an estate where there is little or no funds available to cover the required amounts payable by the estate; or perhaps the buyer purchased the property only recently and is being transferred for work and there is not a large enough difference between his purchase price and selling price if any to offer a seller assist.
Sometimes where an assist can be handy is where a seller has a fixed amount in their head that the house must sell for, because all the houses in the development or neighborhood sell for this, but they don't actually need to sell for that amount to obtain a satisfactory net. Then you can offer the price the seller wants and include a seller assist to lower the buyers closing costs and thus how much money they actually need to purchase the home.
So, when your mortgage provider suggests you can accept a seller assist it does not mean it is always possible to include one in the agreement.
If you are interested in buying a home along the Philadelphia Main Line and think a seller assist might help you achieve your goal of home ownership, give us a call to discuss.