Seller concessions are usually used to make the purchase more affordable for the buyer, or to close the deal quicker by reducing certain costs associated with the sale.
There are two main types of seller concessions: Those offered by the seller and those provided by a lender. Seller concessions are typically offered in order to reduce the amount of money the buyer needs to bring to closing, while lender concessions are usually incentives given to the borrower from the lender to reduce the interest rate or reduce certain fees associated with the loan.
Seller concessions can include anything from reducing the purchase price of the home to paying the buyer's closing costs, such as appraisal, loan origination fees, transfer taxes, title insurance, and survey fees. Additionally, seller concessions can be used to help cover certain repairs or improvements that need to be completed prior to closing. These concessions are usually limited as to the amount and type of cost that can be covered.
For lenders, various incentives may be offered to buyers to reduce their monthly payments or to lower their closing costs. Common lender concessions include reduced interest rates, reduced origination fees, and the waiving of certain closing costs. Lenders can also provide discounts on points (the "buy down" points) or may offer to carry other financing costs for a specified period.
Before agreeing to any seller or lender concessions, it is important to understand what the concession entails, as well as all the associated costs and potential financial implications. Additionally, when accepting seller concessions, buyers should be aware that the concession will likely be reflected in their home appraisal, and could potentially affect the maximum mortgage amount they can qualify for.
In conclusion, seller concessions can be a great way to reduce the cost of purchasing a home, either directly through a reduction in the purchase price, or indirectly through the lender providing incentives to reduce closing costs. However, it is important to understand all the costs associated with the concession, as well as any potential impact it may have on your mortgage qualification.
Seller concession is an agreement between the buyer and seller of a property where the buyer pays less money for the purchase. There are two main types of seller concessions: Those offered by the seller and those provided by a lender. Seller concessions are usually offered to reduce the amount of money the buyer needs to bring to closing, while lender concessions are usually incentives given to the borrower from the lender to reduce the interest rate or reduce certain fees associated with the loan. The types of seller concessions can range from reducing the purchase price, to covering certain repairs or improvements that need to be completed prior to closing. On the other hand, lender concessions may include reduced interest rates, reduced origination fees, or the waiving of certain closing costs.
Before agreeing to any seller or lender concessions it is important to consider all the associated costs and potential financial implications. For example, if the buyer uses seller concessions to cover the closing costs, the amount of the concession may be reflected in the home appraisal, and could potentially affect the maximum mortgage amount they can qualify for. Furthermore, when accepting lender concessions, buyers should take into account whether the concessional rate is fixed or adjustable, as this could affect their monthly payments over the life of the loan.
Overall, seller concessions can save buyers a lot of money, but it is critical to understand the nuances of them to make sure they get the best deal possible. With careful consideration of the associated costs, potential financial implications, and terms of the concession, buyers can often take advantage of these concessions to save money without taking on extra financial risk.
This article was contributed on Jun 28, 2023
