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As a house or estate buyer, you might have come across the term ‘Sellers Assist’ either online or through your real estate agent. You heard it can help you pay for a house, but are not sure if you want to go for it because you don’t really know much about it and how it works.
Reading this article will help you learn about Sellers Assist which is also known as Sellers Concession and how it works.
You will agree with us that paying a down payment and closing cost can be a major challenge for many you especially if this is your first time buying a house.
You may ask, what are Closing Costs? Closing Costs are additional costs which include title insurance, lender fees, escrow accounts for taxes, transfer taxes, and settlement fees. For instance, in some states only closing costs range between 5% and 6% of the purchase price of the home.
Guess you are clear about Closing Cost?
Let’s dive into what Sellers Assist entails and how it takes care of closing costs. A glance at the table of contents below will give you an overview of all this article entails.
What is Sellers Assist when buying a Home?
Seller Assist also known as Seller Concession can be the money returned to the buyer at the close of his financial arrangement with the seller which is used to pay some of his transaction costs.
In other words, Seller Assist is a seller that provides a credit used to pay up the buyer’s closing cost. In the same vein, the credit can buy down their interest rate, pay their first month’s mortgage payment, or pay their escrow and title fees, property taxes, and similar things.
Often, buyers aiming to buy houses or estates forget to budget for closing costs even when they know they can afford it. In most cases, they ask for Seller Assistance, especially when they can pay on installments.
There are a few different ways to conceptualize this, but I see it as enabling buyers to roll some of their closing costs into the mortgage.
How Does Seller Assist Work?
Before you can choose to go for seller assist, you must first learn how it works. First, it must be in writing either in a purchase contract or with an addendum.
Once the contract is settled, a reduction for the seller concession will be deducted from the sales price and the cost will be moved over to the buyer’s side of the settlement sheet to reduce the buyer’s cash requirement. Note, no side deals or undisclosed concessions are allowed.
Now, let’s say a buyer wants to buy an estate worth $500,000. The buyer offers to pay $495,000 with 3% seller assist. This means the seller would give the buyer a credit of 14,850 to cover closing costs. The seller would now have to make a profit of $485,150.
Seller assist for Buyers
Buyers are the major beneficiaries of selling assistance. The reason is that the Seller Concession takes care of the closing costs they are to handle. Also, first-time buyers even without have enough money are encouraged to go for a house they want.
Aside from paying for closing costs, seller assist can be used by buyers to minimize their monthly mortgage payments and interest rate.
Seller Assist to buyers is that some sellers who want to make a high profit might increase the cost of the house which will bring about an increase in the closing costs indexed to the sale price. Also, there can be an increase in the monthly mortgage payment and total debt.
Seller assist for Sellers
Although it looks like sellers assists favor only buyers, sellers also benefit.
Seller assist helps sellers attract prospective home buyers. If a seller has been attempting to sell their home for months to no avail, offering seller assist could help them make a sale.
It enables sellers have more qualified buyers making offers even if they don’t have enough savings. Also, sellers don’t necessarily lose anything by giving seller assistance because they are the ones to fit the cost.
Are there Alternatives to a Seller Assist?
Yes. Even though seller concession has been of great help to both sellers and buyers, it doesn’t work in every situation. So, on this note, it’s important you know other credits that can also be of great help like seller assist.
Below are a few of them:
- Closing cost credit. A buyer can also ask for closing cost credit if he/she is paying a higher price. Just like seller assist, this credit also helps the buyers get the house they want without having to pay for closing costs. Note, the limits on closing cost credits is 3% of the purchase price.
- First-time homebuyer grants. First-time homebuyer grants is another alternative to selling assist. With these grants, buyers can pay closing costs and down payment.
- FHA loans. FHA loans are worth going for in case you don’t want seller assist. With this loan, buyers can borrow a percentage of the home’s value if their credit score is high enough or they have a considerable down payment.
Whether you are a buyer or a seller, Seller assist is a can benefit you a lot. In fact, it’s a win-win so long as both parties know exactly what they’re getting into before signing on the dotted line.