With housing interest rates hovering around 7%, it’s no surprise that the housing market has slowed considerably, with home sales falling nearly 20% from August 2021 to August 2022, according to the Association of Realtors. Along with the slowing of sales, there has been a turnaround in the prices and inventory of homes, with the median price dropping 7.5% from June 2022 to September 2022, and active inventory is up 28% compared to last year. The fierce competition for available homes has waned, and sellers may need to get a little more aggressive to attract buyers.
One way that buyers can have more money to use for a down payment and other costs is to ask for seller concessions or credits. Simply put, a seller concession is an agreed amount the seller agrees to pay toward closing costs on the buyer’s behalf. It could be as little as a few hundred dollars, or in the thousands. Seller concessions can include helping pay for property taxes, loan origination fees, inspection fees, appraisal fees, attorney fees, recording fees, repair costs, or mortgage points.
Here are a few reasons why a seller concession may make sense:
- Speed up the closing process. If the seller needs to sell the home within a specific timeline because of the need to move for a new job or to close on another house they are purchasing, then this can entice buyers to move quickly.
- Gives the buyer more cash to make a larger down payment. How much a buyer puts down can mean the difference between getting a lower rate, and not having to pay PMI (private mortgage insurance).
- Makes the house more desirable in a competitive market. Even when inventory is low, buyers are looking to find the right house they can afford, and a seller concession may swing buyers in your favor.
There are also disadvantages to asking for a seller concession. If none of the other buyers have asked for a credit, you may be left off the negotiating table.
The best way to decide if you should request a seller concession during negations is to ask your real estate agent. They will gauge the market conditions and the seller’s situation and help you plot the best course on what to ask for. If you have other questions or would like to talk to one of the experts at NASB, give us a call at 855-465-0753.