6% Seller Concession Help! - Posted by Rob

Posted by Tim Fierro (Tacoma, WA) on February 22, 2002 at 23:36:37:

One way this could be done is as you have guessed. Something along the lines of;

Seller agrees to contribute 3% towards XXXX charity/downpayment/program.
Seller agrees to contribute up to 3% towards buyer’s closing costs and any prepaids.

So you as the seller agree to 3% for their downpayment assistance type program, and you are paying for up to 3% of their closing costs.

But these programs have fees, you will have a higher excise tax for a higher price on the house, and you will have a higher agent fee for his/her commission.

Assuming you raise the price of the house from $125k, up to $135k, you might be ok. Approximately numbers: $600 for extra agent fees, $4050 for downpayment program, up to $1350 for fees with charity program, $4050 in closing costs paid by you, and maybe $180 extra for excise tax; would total about $10,230. Subtract from your new price of $135k leaves you at $124,770. These numbers are approximate.

So you could give these ‘concessions’ in the above format and still get your price you want in cash. However, will the home appraise for the bank for that extra $10k?

And you are right, you are paying for the extra fees in the raised price, so make sure you are getting reimbursed if you go this route or you might end up with less than the $125k you are asking.

6% Seller Concession Help! - Posted by Rob

Posted by Rob on February 22, 2002 at 22:57:42:

I have a house that I leased out on a rent to own deal. The house is being sold for $125,000.00. The tenant called tonight and said they where looking to get a mortgage and asked me if I would do a 6% Seller Concession. What exactly is seller concession and how does if work? I think it’s rasing the sales price to 132,500.00. But wouldn’t I be liable with taxes even though I not getting the additional $7,500.00. If so why would anyone do this and how dose it benefit me?



Re: 6% Seller Concession Help! - Posted by dewCO

Posted by dewCO on February 23, 2002 at 10:04:05:

See wants you to pay 6% of either the loan amount or purchase price towards her closing costs, etc. That’s what it means. Whether or not you can raise the price by all or part of that amount depends on what it appraises for mainly.

Most of that 6% or whatever you agree to give her if anything, can be written off as an expense of closing I would expect. The only part that won’t be written off is if she is using an assistance program for the down payment like Neamiah, or Gold something or other, then the program keeps 1% as their fee.