As a seller in our current market, you may be asked to make concessions to help close the deal on your home. But what exactly are seller concessions, and how can you use them to negotiate a better deal?
Seller concessions are essentially any incentives or credits that a seller offers to a buyer in order to make the sale more attractive. These can include things like paying buyer's closing costs, offering a home warranty, or even offering to make repairs or improvements on the property before the sale is finalized. Typically though, they are credits given the buyer at closing to help offset their closing costs.
One of the main benefits of seller concessions is that they can help make your home more attractive to buyers, especially in a buyers' market. For example, if a buyer is on the fence about your home because they aren't sure they have enough money for closing costs, you could offer a credit at closing in order to sweeten the deal.
But seller concessions can also be a useful negotiating tool for you as the seller. For example, if a buyer is asking for a lower price on your home, you could counter by offering to pay a larger portion of the closing costs or by agreeing to make certain repairs. This way, you can potentially get higher net proceeds while still making the deal more attractive to the buyer. For the buyers, the additional cost in their monthly mortgage payment is usually easier to cope with than coming up with a lump sum for closing. This may be a great way to get your propertyunder contract.
With the higher interest rates we're seeing now, many sellers are offering buyers interest rate buydowns. There are many options for buydowns, but essentially the seller pays a credit at closing that the buyer can use to get a reduced interest rate for either the life of the loan or the first few years. This is a way buyers can afford more house for the same payment. Since most experts are expecting interest rates to drop in a few years, using temporary buydowns can help get buyers over the hump until the interest rates are low enough for them to refinance.
It's important to keep in mind that seller concessions should be used strategically and with the help of a real estate agent. You don't want to offer too many concessions, as this can eat into your profits. At the same time, you don't want to be too stubborn and risk losing the sale altogether. If you are hoping to add the cost of the concessions to the purchase price so you net the same, you need to be certain the home will appraise high enough to cover that purchase price. If not, the buyer won't be able to get a high enough loan to make the deal work. This is where your real estate agent is crucial in helping set up the deal so it will make it to the closing table.
In the end, seller concessions can be a useful tool for both buyers and sellers in a real estate transaction. By understanding how they work and how to use them effectively, you can potentially negotiate a better deal on your home sale.