As a buyer should I take Seller Price Reduction or Closing Credit

[Adeline Tai]

Hi, First post here. :)

First time home buyer in California, seller is willing to credit back $10K on a million dollar sale price. What's the pros and con on price reduction vs. closing credit? I received a lot of mixed feedback. So far my understanding is this is based on weather I need cash right now or later? and how long I plan to hold the property for? Pros of price reduction is high price and taxes increase each year. Pro for closing credit is that you get the $10K now that you can invest elsewhere and likely get a higher return than the current mortgage rate and it'll takes years before capturing the $10K back. Not sure if someone can help me with the numbers as well, like what to take into account. 

Sell price:990000 vs. Price reduction of 980000

property tax :1%

special assessment: TBD

rate 2.375%

30 years loan

20% down

Thanks!

[Will Fraser]

Hi @Adeline Tai, the distinction is actually quite simple.  Would you benefit more from $10,000 towards some repair or improvement on the home right now, or $19.80 (more or less) each month?  

There's not a wrong answer here.  In general when I have clients in this situation there are almost always things that they want/need to fix with the home to make it just right (for them), so personally I'd rather "borrow" that $10k for the repairs at a rate of 2.375% interest instead of locking more of my capital into the same asset.