Why Investors Should Ask for a Seller Assist When Buying Property

by | BiggerPockets.com

Not all real estate agents are investor real estate agents. Just the other day, I was trying to explain this concept to a young man in my office who’s looking to buy his first property.

First, I told him that it makes sense to sit down with a mortgage broker to get pre-approved for a mortgage before trying to go out to look at properties with a real estate agent. Otherwise, he might as well be window-shopping.

Then, I explained the importance of working with a real estate agent who commonly works with investors to help them find deals. As many of the experienced investors know, all real estate agents are not created equal.

Finding an Investor Real Estate Agent

Of course, finding the right real estate agent is easier said than done. For example, in my old office, there were approximately 150 real estate agents, and I believe only two of them were true investors. The average agent primarily sells homes to owner occupants, whose idea of investing in real estate is all about their primary residence and maybe a vacation home.

Keep in mind, the majority of agents are really not real estate investors. Most are salespeople who make most of their money from real estate commissions and not by investing in real estate. I know this because at one time, I was one.

Your best bet for finding an investor real estate agent is through word of mouth (referrals), but sometimes REO agents may be good, or you may find some at real estate agents associations.

This type of agent may be able to suggest different buying strategies (for example, utilizing a seller assist) that maybe you overlooked or hadn’t thought of yet.

Related: #AskBP 074: What is Seller Financing and How Does it Work?

Why a Seller Assist Makes Sense

An investor real estate agent would always–yes, I said always–push to utilize a seller assist in most circumstances when making an offer where there’s a mortgage involved, even if that means going in at full price with the assist still intact. All one has to do is see a sample of the numbers:

Sales price = $100,000 rent = $1000/month
Mortgage payment = $850 a month PITI (Principal, Interest, Taxes, Insurance)
Cash flow = $150/month

This property, purchased with 5% down, will run around $13,000 total cash required at settlement. So this means that with $150 a month in positive cash flow multiplied by 12 months, you’re making approximately $1,800 a year, and if you divide that by the total investment amount of $13,000, the deal is yielding a return of approximately 14% before any maintenance or management costs.

Even if a buyer paid over asking price (with up to a 6% assist) up to $106,000 total sales price, that would net the seller the same net proceeds as full price, and the total cash required would drop to around $8,000 ($14,000 cash required to close minus $6,000 from the seller assist).

Cash flow would be a little lower since the mortgage amount is a little higher. The monthly payment will go up slightly, but keep in mind, your tenant will pay it back, you’re keeping the mortgage interest deduction, and you’re able to finance $6,000 of the total cash required over 30 years.

In this example, with $120 month in cash flow multiplied by 12 months, you’re making approximately $1,440 a year, and if you divide that by the total investment amount of $8,000, the deal is yielding a return of approximately 23% before any maintenance or management costs.

As you can see, this yield continues to rise the less total cash that an investor puts up, as long as you still cash flow after PITI. Indirectly, the seller’s assist is allowing you to finance part of your closing costs. This strategy works on owner-occupied properties as well. That being said, not all real estate agents push this strategy.

Why Real Estate Agents Fight the Assist

I’m not really sure why this occurs other than they either don’t understand why the seller’s assist helps the buyer. They never really crunched the numbers, or they just think it’s a harder sale to make to the seller. But at the end of the day, it’s all about what the seller nets, and if the buyer’s agent can sell the assist, they’ll usually make a little more commission, too.

Related: Discover a High Yield Seller Financing That Buyers Love, Too

What Can Be Part of the Assist?

As previously stated, you can try to get an assist for up to 6% of the sales price. The assist can go towards anything that is a prepaid expense of the buyer(s). Examples of prepaid items are taxes, insurance, private mortgage insurance, prepaid interest (points), etc.

You can even have the seller pay the buyer’s transfer taxes, and it should still be acceptable to the bank. Also, check with your accountant, as the buyer may still be able to write off the transfer taxes regardless of who pays it.

One thing to keep in mind is the higher the sales price, the larger the assist. For example, when you get up to around 6% with the seller assist, or if the price of the house is higher, you may not be able to use all of the assist, as you may have more in assistance than you do in prepaid items. In some cases, it may be better to take a little lower assist with either a larger repair credit or a lower sale price offer.

So if there’s a mortgage company involved, you have to play by the rules. On cash deals, the assist isn’t as advantageous because your closing costs are minimal, unless it’s a cash deal where you don’t have quite enough cash to pay the purchase price and the closing costs combined.

Buying Strategies

As you can see, the seller’s assist can be a very powerful tool when purchasing an investment property that’s in good enough condition to obtain a mortgage. This means a property that doesn’t need to be rehabbed before turning it into a rental.

So, here’s an example of a typical deal that I’d like to invest in to accelerate my rental portfolio. Usually, I go after an affordable, bread-and-butter, blue-collar home that has a large audience of potential tenants. Obviously, I want at least a $300/month cash flow before PITI.

I’d write an offer fairly close to asking price with a 3% to 6% assist and a home inspection. I would always leave in the seller assist at all costs, and I love buying an estate or a house like my grandmom’s (functionally obsolete). By this, I mean houses that are totally functional and don’t need much work, but may be more suited to renters over owner occupants and may not be modernized.

Then, I would utilize the home inspection in the hopes of getting some repair credits, and along with my real estate commissions (since I kept my real estate license), I often purchased homes that cash flowed with very little cash out of pocket.

Some of these deals were even better than full-blown rehabs, especially if I was forced to leave equity in the property or if the project were to take several months to complete, refinance, and rent.

So, have you utilized a seller assist when purchasing your investment properties? What are some of your favorite seller assist deals?

Let’s talk in the comments section!

About Author

Dave Van Horn

Since 2007, Dave Van Horn has served as president and CEO of PPR The Note Co., a holding company that manages several funds that buy, sell, and hold residential mortgages nationwide. Dave’s expertise is derived from over 30 years of residential and commercial real estate experience as a licensed Realtor, a real estate investor, and a fundraiser. As the latter, Dave has raised over $100 million in both notes and commercial real estate. In addition to his investments and role as CEO, Dave’s biggest passion is to teach others how to share, build, and preserve wealth. He authored Real Estate Note Investing, an introduction to the note investing business, helping investors enter the “other side” of the real estate business.


  1. Roy N.


    Is using a seller assist still legal across the U.S.A.? Is it disclosed on the HUD?

    Here (Canada) lenders won’t typically play ball if the buyer simply offered cash-back. To accomplish this the buyer and seller would need to disguise it as a concession – say to repair a fence or replace the roof – and the lawyers would have to go along.

    • Dave Van Horn

      Hi Roy,

      The answer is yes, seller assists are both legal in the USA and disclosed on the HUD.

      As for your point on Canadian lenders, you’re right, a bank might want to see repairs paid to the contractors but they may also allow pre-paid items and transfer tax to be paid on your behalf.

      A repair credit can also be paid to a contractor, this is where many investors try to get creative by utilizing their own personal contractors to receive the credits.


    • Shaun Reilly

      That is interesting Roy as I would say it is almost the exact opposite here.
      Banks don’t think anything usually of credits towards any closing costs and pre-paids, but they HATE seeing repair credits.
      In fact when ever I have had money agreements for repairs after an inspection we just set it up as a closing cost credit (Buyers like this too since about 95% of what they ask for is BS and they never actually do the repairs and pocket the money).
      If we agree to do repairs the attorneys always want to do a separate repair agreement outside of the purchase contract so it doesn’t have to be sent in with that and won’t raise any red flags.
      BTW in all the houses I have sold I think only once has the buyer had a different attorney than the one doing the closing for the bank, so the lenders representation is well aware of what is going on and is usually a driving force for it.

  2. Dante Goh

    How come you are targeting rental Blue Collar Home compare to white collar rental? And do you actually look at the area of the property? And let me get this straight, you raise the asking price to 6% and the seller agreed because it is technically the same profit for him, even if he paid your prepaid expenses and can you give 1 simple example how you manage to do this (Sorry but new to this assisting thing)?

    • Dave Van Horn

      Hi Dante,

      Like I said in the article, I personally choose Blue Collar rentals because of the higher abundancy of tenants I can find. Some people have different models where buying White Collar properties works for them.

      And yes, that’s correct. One simple example would be when I bought my last house for $190K and my settlement cost was around $15K, so I would’ve needed $205K total. Since I used the 6% assist, I was able to purchase the property with almost $12K coming from the assist and only a few thousand out of pocket.


    • Dave Van Horn


      I agree, which is why I mentioned I’m not including those things for a simple illustration. The goal of the article was to show the power of the assist and how utilizing one requires less capital invested into the deal and as long as you cashflow your yield will be higher.


    • Brandon Rooks

      Ronnie – The slightly higher price on an average Rental Property would barely affect the tax rate increase, if any. Property Values are assessed differently from County to County and State to State. However, even if you were to experience a tax increase, you should be able to raise the rent rate to offset the higher tax rate.

      Also, there are many positives that would or could easily outweigh a slightly higher tax rate, even if you were unable to raise the rent rates to cover. If you purchased a property that was giving you a 20% annual cash on cash return & a tax increase dropped you to a 17% annual cash on cash return, then how important is it that the Tax rate increased at all ? There is also net positive cash flow, principle reduction, tax deductions & equity gains to be had with that investment that are all bonuses on top of the annual Cash ROI.

  3. Kenneth Craycraft

    Great article Dave! Could you explain, or point me to a resource, the breaks down of the costs you have estimated for the cash required to close? In your example you said $13K on $100K with 5% down. I assume $8K was from the down payment plus half the commission (5% + 3% effectively). The $5K difference seems substantial. I know some of it will come from inspections, transfer fees, etc. I could I use help to make sure I’m estimating my cash requirements effectively and not missing something huge. Thanks in advance!

    • Dave Van Horn

      Hi Kenneth,
      Thank you for your comment. Closing costs vary dramatically across the country, as it’s all about what is customary to that geographical area.
      For example, in the north east closing costs are way higher than in some states in the south. Mississippi’s closing costs are a fraction of what they are in Pennsylvania. Some states require an attorney present at closing, which adds additional costs as well. Transfer tax varies based on location too.
      Although my numbers in the article really just served as an example, your local mortgage broker or realtor could probably give you a more accurate estimate for your area.
      I hope this info helps!

  4. Brianna Herridge on

    I’m not sure if this is only on special situations or not, but our investor loan would only allow for a 2% contribution from the seller. Banks want you to put as much money down as possible on a secondary home.

    We found this out right before closing…We had to renegotiate with the seller. We were able to reduce the selling price to account for the seller contribution over the 2%, if that makes sense.

    • Brandon Rooks

      That is correct Brianna – Conventional Financing with Fannie Mae / Freddie Mac only allows for a 2% seller contribution on the HUD. However, there are some other things you can work into the deal that will allow you to take advantage of some more Seller Incentives.

      We negotiate with Turnkey Sellers across the Country to secure these incentives for our Clients.

      1. 2% of purchase price in Seller Paid Closing Costs
      2. Home Inspection, Pest Inspection & treatment ( if necessary ) Paid for by Seller
      3. 1 year Home Warranty paid for by Seller
      4. Tenant Placement paid for by Seller

      Items 2, 3 & 4 can all be requirements of the Seller as part of the purchase package & then only 2% S.P.C.C. will be a Seller Credit on the HUD at closing. If your Lender does not agree, reach out to me and I will give you 4 National Lenders that have completed thousands of these transactions to help you on your next purchase.

      • Brianna H.

        Thanks for clarifying! I never thought about asking for tenant placement paid by the seller. We did require the seller to buy a year of home warranty for us. Our seller was about to starve he was so broke, so the other items wouldn’t have worked so well in our situation. Great advice for the next time, hopefully!

  5. Cody L.

    I always always do this. The only time it wouldn’t work is if you’re struggling with getting the right appraised value (since lenders will loan on price or appraised value, whatever is less). But on deals I know will appraise for more, I always asked to raise the price, and get a credit back.

    I just bought a single family as a rental property (I don’t normally by SFH, but this is on a lake where some of my other family has homes). The purchase price was $380k. Appraised was $410k. I got the seller to raise the price by $25k, and offer a $25k credit.

    The purchase price was now $405k. At 20% down, I had to bring $81k, minus the $25k, or $56k + some closing costs. Had I not done the credit, I’d have to bring $76k + closing costs… $20k more.

    And since this wasn’t bought with strong income numbers in mind (more of a vacation home that I’ll also rent out on VRBO), having $20k less into the property makes whatever return I end up getting that much better.

    • Cody L.

      I bought an abandoned commercial building from a hard money lender (he posts here actually, but I won’t mention his name). Bought it for $500k. I knew the appraisal would be $800k easily. Changed contract to $750k w/ a $250k repair credit.

      Appraisal came back at $780k (it was lower than I thought but the contract we had heavily influenced what it appraised for). So bank loaned me $525k (70% or purchase price.)

      I actually walked from the closing with $. And then I tossed in a nice fat NNN renter in there, who pays way more than my note. Hard to calculate ROI when my “I” was less than $0 and it cash flows nicely.

      If only all deals could be like that…

    • Dave Van Horn

      Yes you’re right. Your experience demonstrates the power of the seller assist, which is what I was trying to show in this article, especially for folks on BP who may not feel that they can utilize this strategy for their deals. Thank you for your comment Cody.

  6. First time home buyer in Canada here. Looking at 5% down on a 299,000$ home. House needs new roof and chimeny repair. How can I benefit from seller assist? Do I make an offer with 3% seller assist and home inspection. What is my best case scenario?

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