Sellers Contributions, Paying For Buyers Closing C
In the previous article I referred to the sellers contributions. This is where the seller agrees to as part of the purchase price to pay for allowable buyers costs of buying a home. This could include lenders origination fees, appraisal costs, title and escrow, credit report, and other costs the buyer may incur.
I noted in the previous article that in the area of Salt Lake City illustrated that the average mark down was about 3%, which included closed purchases that gave the buyer money as a sellers contribution.
Why would a buyer ask for this instead of just a lower purchase price? The answer: to limit the funds required by the buyer at closing. First time home buyers are almost always tight on cash. Many I have worked with saved for a lengthy time for the sole purpose of buying their first home. It is not a reflection of a buyer or buyers being a good or bad borrower to ask for the seller to contribute, so don't be off tended if you as a seller are confronted with this request. Expect this request if your home is priced where first time home buyers are your likely buyer.
How to negotiate this is a question for buyers their REALTORS®. Usually sellers reject asking for a lower price and sellers contributions by throwing out the contributions. Often this makes the sellers (don't be this way sellers) tougher to negotiate with. My experience is as a buyers agent to first negotiate the lowest possible price. After the price is agreed to come back with a request to raise the purchase price by the amount of contributions needed or desired.
Yesterdays survey surprised me as to the number of transactions that included sellers contributions. The home must appraise for the higher amount and the appraisers know the details of the transaction, including the contributions the seller is providing. Much of the blame for the crash in the market of nearby years past was placed on appraisers. The penalties for an appraiser to intentionally overstate a homes value are serious. I wouldn't blame an appraiser for a conservative final value that didn't meet the terms providing for a sellers contribution.
There is a simple statement to tell the seller in a case where the appraisal falls short, 'The Home Didn't Appraise'. The solution in this case depends on each situation. If the seller was asking too much for their home and their were not contributions to closing costs, the seller in almost every case is in a position where they must lower their price. Only once have I seen a buyer agree to make up the difference by being willing to pay the extra and the extra down payment needed for their home. If the price was raised too high to cover the closings costs, the contributions must go. The problem here is if this leaves the buyer short of cash to close.
It takes agents, lenders, and open minded sellers to navigate these waters when the buyers need the seller to contribute.
by Larry K Cragun, REALTOR®
MediaOne Real Estate, Utah
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