How can I give buyer money without freaking out bank?

10 Replies

I have decided it is time to sell a rental property.  It is totall remodeled and quite nice, but because it was purchased as a rental the kitchen countertop is "recyled" off white Corian.  i am envisioning the countertop being the easier of two "objections" to the property.  (One cannot be fixed as it is messy neighbors across the street.)

Can I fix the countertop objection with giving the buyer money for a new countertop at closing?

This is an entry level house.  Buyers will be tapped out at closing.  But the other comps at my sales target have granite...doesn't everyone nowdays?  I hate to go through the hassel and expense of replacing the Corian unless I have to....and if the house doesn't bring what I want I will rent again.  

Can I escrow money for a countertop...or what?  I have often wondered why the 203 loans used instead of buyers negotiating a higher price  and getting a repair/change what I don't like escrow account...appraisals are just not that accurate...5% give or take...From what I can see of sales prices.  

You can offer top ay up to $3k, or whatever, in buyer's closing costs.  Same thing, saves them cash out of pocket.  But, if you really want tot sell it, change it now...buyers don't "envision", they see what is there.

So a buyer with FHA financing can pay as much as the house can appraise for with .5% down if the seller will "concede" 3% closing costs in the negotiation?

Is there any reason not to go with someone using FHA financing? If they are approved for the 3.5% down option?

Oh, and thanks.

Originally posted by @Marian Smith :

So a buyer with FHA financing can pay as much as the house can appraise for with .5% down if the seller will "concede" 3% closing costs in the negotiation?

Is there any reason not to go with someone using FHA financing? If they are approved for the 3.5% down option?

Oh, and thanks.

 The 3% can go towards closing costs, not down payment.  The buyer needs to come with their own down payment.

And the down side of selling FHA, is that they are picky, picky, picky, after all, next to a VA, it's the highest risk LTV loan out there, so the place needs to be tip top. Older counter top is okay, so long as it is in good condition. It's the appraisal that can hang the deal! Good luck :)

That makes sense....1/2 % isn't much skin in the game.  But closing costs are routinely financed into the note and at todays interest rates 5k is only $25 a month.  Most buyers would rather finance 5k into the note and pay an extra $25....and most would have to borrow/charge a 5k remodel even if they got 5k off the list price.

Scott Burns wrote a column a few years back and stated that a huge percentage of Americans would be hard pressed to come up with 5k in short notice.  Things might have changed, but I have two sets of renters making good money, 100k, and they're renting and have been for years.

Sounds like there is no way to give a redecoration allowance in ready spendable currency...what about a prepaid account, like a gift card to a granite place or Home Depot.

Originally posted by @Marian Smith :

Sounds like there is no way to give a redecoration allowance in ready spendable currency...what about a prepaid account, like a gift card to a granite place or Home Depot.

 Probably not legally.

You could put the money in escrow to be used for the countertops, but you'd have to disclose to the lender, and -- while they could likely make it happen -- it would be a bunch of time and effort.

Why not just replace the counters now and have a nicer house to market???

Originally posted by @J Scott:
Originally posted by @Marian Smith:

Sounds like there is no way to give a redecoration allowance in ready spendable currency...what about a prepaid account, like a gift card to a granite place or Home Depot.

 Probably not legally.

You could put the money in escrow to be used for the countertops, but you'd have to disclose to the lender, and -- while they could likely make it happen -- it would be a bunch of time and effort.

Why not just replace the counters now and have a nicer house to market???

 Agreed, it is easier to just replace them then you have no worries.

If you are serious about selling I would change out the counter tops.... Kitchens sell. @Wayne Brooks is right, buyers don't have the vision to see past what is actually in front of them.

FHA loans (probably a product your potential buyer would be using, based on your OP) require at least 3.5% of buyer's funds in the deal so adding any seller subsidies into the deal can be tricky...

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