Sellers Concession? (LONG)

Hi All!

I'm hoping a R/E Agent/Attorney/someone wth experience could help...

We received an offer on our house today, and it is a decent offer. The only thing that i wasn't sure about was a 'sellers consession' where 6% is added to the purchase price of the house, and then refunded to the buyers upon closing.

So, if im understanding correctly, it is the equivilent of taking out a Home Equity Loan, since the $$ is given back at closing. They basically now have 25k cash for upgrades, etc, which was added in to their mortgage

My questions are as follows:

IS the Agents comission based on the 6% higher cost, or the cost after the refund of 6%?

Will there be any penalties to the seller (in terms of Capital Gains taxes, etc)

TIA!!!!

Message edited 12/19/2006 5:44:12 PM.

Re: Sellers Concession? (LONG)

Ok, say after any money down after an accepted agreement you are buying the house from the seller for $300,000.
With a 6% sellers concession, your total purchase price would be $318,000. This would be the amount of your mortgage. You are not taking out a second loan for this, its added to the actual mortgage. At closing, the sellers are cut a check for $318,000, and then they give you $18,000 back for you to pay closing costs, upgrades, whatever and they get their $300,000.

The commission is based on the sale price of the house, not the amount of your mortgage.

The only penalty you would incur is that your mortgage payment would be higher, you're taking out a bigger loan.

Also, the house has to appraise for at least the amount with the concession added on. The bank isn't going to give you more money than the house is worth.

Re: Sellers Concession? (LONG)

Re: Sellers Concession? (LONG)

Re: Sellers Concession? (LONG)

RE agent get the sale price of the house only.

Sellers concession is only bad for a seller if the house is not appraises for the value that the loan is take out for...

Re: Sellers Concession? (LONG)

Re: Sellers Concession? (LONG)

Re: Sellers Concession? (LONG)

Re: Sellers Concession? (LONG)

Re: Sellers Concession? (LONG)

Re: Sellers Concession? (LONG)

thanks so far for all the advice!

Re: Sellers Concession? (LONG)

Re: Sellers Concession? (LONG)

but then I guess the penalty for the seller could be the sale itself

if the house doesn't appraise the buyers don't have the closing costs or money to fix the house the way they want it- they could back out

or you could lower the price

personally in this market- I wouldn't buy a house that didn't appraise for more then I was paying

Re: Sellers Concession? (LONG)

Re: Sellers Concession? (LONG)

a capital gains tax will only apply if your profit from the sale is more than $500k.

a sellers concession should only be done if the buyers have the funds as a back up. if they dont have the money just in case the appraisal doesnt come thru to include the concession, then i wouldnt accept the offer.

Re: Sellers Concession? (LONG)

there are transfer taxes/fees for the seller to pay that will be slightly higher once the sellers concession is taken into consideration, but most buyers will cover the nominal difference.

We (as appraisers) are running into a lot of problems with concessions these days. With the rising market, stretching the value of a house wasn't that big a deal since the market would catch up. In a declining market, we're prone to be more conservative to protect ourselves.

Since the market hasn't gone up in over a year, and prices have even dropped in some areas, its tough to add 6% onto a valid selling price. Especially since a lot of the deals we see w/concessions are *supposedly* selling at asking plus the 6%...thats 106% financing+ (meaning they can't afford a downpayment, can't afford closing costs, and most likely can't afford the mortgage - so when they foreclose, the bank is coming after ME, if I overstate the value)