Making An Offer To Buy A Home Using Seller Concessions

Dated: 02/21/2014

Views: 5525

Let's talk today about making an offer to purchase a home and what steps take place after the offer is accepted and financing is needed to make your purchase. First things first, have your agent review the comparables in the area that are of similar size and condition to the home that you are looking to purchase. The agent will want to be your buyer's agent to show that they represent you in the transaction and will give you all the necessary information needed to make a fair offer this home. 

 Depending on the type of mortgage that you will obtain you may need or want to ask the seller for a seller concession to help pay for your closing costs. Should this be your case then it depends on the type of financing you will obtain as to how much you can ask for. As an example: if you are getting a conventional loan your seller concessions cannot go over 3% ( max is 6%, but you need to put a down payment of more than the minimum of 5%)of the contract pricing or the appraisal pricing depending on the lower of the two. Should you be obtaining an FHA mortgage the seller concessions cannot go over 6% of the contract price or the appraisal whichever is lower and the third scenario would be a VA mortgage and the seller concession cannot exceed 4% of the contract price or appraisal whichever is lower.  These three are the most common mortgages that are used for financing and there are other high-bred mortgages out there but for our purposes we will use the most common mortgages; i.e. Conventional, FHA and VA.   So for this example we’ll use a conventional loan with an offer of 150K for a property listed at 158K. Your agent checks the comparables and sees the last homes that compare to the home you want to purchase have sold for 155 to 160K; so in order to ask the seller to help with your closing costs you boost up your offer of 150K to 154500K asking the seller to give back the 3% towards your closing costs. 150K x 3% = 4500. If the seller accepts your offer they will net 150K at closing because they are agreeing to pay 4500 of your closing costs on your behalf.  If the seller counters back at the 155K and adds 3% to that counter they are making a counter offer of 159650 back to you the buyer. (155K x 3% = 4650). They want to net the 155K versus the 150K that you offered. If you decide to agree to the counter offer your agent needs to look over the comparables again to be sure that other homes in the area have sold for at least 160K for the appraisal to come in at the contract price or above. If the appraisal comes in lower than the contract price your mortgage company will want you the buyer to make up the difference between the contract price and the lower appraisal price; if that is not possible go back to the seller and ask the seller to lower their price to the appraisal price. If both parties cannot agree the deal dies and the buyer gets back any money that has been retained in escrow, however, be aware you will pay for the appraisal. It's  much less painful to find out now that your investment is not worth the higher price you agreed to pay.
  When a buyer needs the seller to help contribute towards their closing costs, it puts the buyer in a position of making an offer that is constructed to show the seller you are serious about your offer and does not come in real low to insult the seller. This is the reason knowing the comparables in the area are very important before making your offer. No need to get started on the wrong foot, you know what they say about first impressions, you only get one try! If you insult the seller sometimes they are less cooperative with the negotiation process. Make sure your agent is experienced or has someone in their office that can assist with making a fair offer using seller concessions.
Because there is a mortgage involved the appraisal becomes a big part of the transaction and it is wise for a buyer to know and understand how this process works. Constructed properly this can be the difference between a buyer making a purchase and obtaining their dream of home ownership and not making a deal at all. This process can be well worth your time to investigate and use especially if you are a first time buyer; you may not have all the money needed to cover all the costs involved in purchasing a home. It’s still a great way to realize your dream of home ownership!  
Next week we’ll talk about credit and why is that so important when financing a home. Don’t get caught in the pit falls when buying a home!!   I hope this helps out to prepare for a great buying experience in your future and if you need a confident and caring agent with over 20 years of working with buyers and sellers call Pamela Pam Camiscioni at The Van Dyk Group located at 500 Barnegat Blvd., Suite 300 Barnegat, NJ 08005. My direct number is 609-433-0418 or e mail me at pcamiscioni@vandykgroup.com
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Pamela Camiscioni

Pam’s a residential agent for over 20 years servicing clients from first timers to retirees covering all aspects of the residential real estate spectrum from listing your home to finalizing your new....

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