Sellers concession

[Blake Williams]

I put an offer on a house using a conventional loan, I am putting 5% down and asking for 3% sellers concession. My real estate agent is telling me that sellers concession only allows me to add the closing costs into my mortgage and that the seller does not actually pay the closing costs, however what I have read tells me different. Is there anyone that can please clarify this for me because I feel like I do not have an agent that is looking out for me, and I don't want to pay for anything I don't have to.

[Daniel Araque]

@Blake Williams Hello Blake, 

This is the simplest way I tell my clients. 

Ex. Say your maximum loan Amount is $190,000 and your maximum purchase price is $200,000, due to the fact that you are putting down say 5% ($10,000).

The home you want is listed at $195,000 and your agent is telling you to offer $190,000 with no closing cost contributions, meaning you would have to come up with the closing costs (approx. %3) out of pocket and 5% downpayment as well. Estimated $15,200 to close 

Or your realtor could tell you to offer the full asking price at $195,000 and ask for 3% seller contribution, which would be the  $5,850 that would be effective money going towards your upfront closing costs, meaning you would only have to come up with the 5% of the new purchase price of $195,000. Estimated $9,750. 

What your realtor is trying to say is, instead of paying the closing cost up front, you will go up in price which would  obviously adjust slightly higher on your mortgage, but your seller would take the weight of paying the upfront cost of closing, which some people might not have handy. Sometimes these contributions are what save the deal and slight negotiations in higher purchase price are effective. 

Hope this helps. 

Dan.