Deal $ options - what are your thoughts?

Question

If a seller is offering monetary concessions to close a deal, is it better to get a reduced purchase price, or apply those concessions toward cash to close?

Andrew Freed · Answer

@Lance Mundo - Cash at closing all day as long as it'll appraise. With cash at closing, that will greatly enhance your cash on cash return as a result of bringing less cash to the table. You are limited with the amount of seller credits you can receive (I believe it is 2-3%) hence any seller credits you cannot use should be repurposed and be used to reduce the price of the property.

What I will add to this is if the seller offers to fix the item before close instead of another form of concession, never accept that option. Take seller credits instead. The owner is incentivized to do the bare minimum work possible since the seller is getting rid of the asset. Hence you'd be better off getting the funds and finalizing the work yourself since as the new owner, you will surely have higher standards.

Chris Seveney · Answer

@Lance Mundo

Cash at close.

If you think about it. On a $100k loan if you are putting $25% down you are out of pocket $25k.

If they reduce price by $4k you now are paying $24k out of pocket.

If they provide $4k at closing you are $21k out of pocket.

Eliott Elias · Answer

I would get a reduced purchase price and get a 2/1 buy down from the lender. You might as well wait a year and refi rather than using those concessions for rate buy

Mason Hickman · Answer

@Lance Mundo

Having the concession as cash back at closing will put more risk on the appraisal due to the higher purchase price. Reducing purchase price obviously reduces the monthly payments, etc. It's really your call but a concession, any way you cut it, is good.

Steve Vaughan · Answer

Depends I suppose.

When I was starting out and needed mortgages and had tight budgets? Concessions for sure.

If you're getting a mortgage,  a rate buy-down may be the way to go.

Either way, nice to have a seller concession at all.  Do what works best for you👍

Deal $ options - what are your thoughts?

Most Popular Reply