Question on seller contributions

[Andy Sabisch]

Well as the market shifts thanks to the interest rate hikes, the offers one receives also change.  Wanted to get perspective on this offer.  

We have a small flip house that we listed for $98K (I know, market drives price and this is on 2.5 acres and 1200 ft2 but the price is what the market supports).  We received an offer of $95K with a provision that seems out of line . . . wanted your feedback.  The buyer is asking for $5,700 towards closing costs, pre-paids and concessions.  That works out to be 6% of the purchase price.

Now as many of us remember even a few months ago multiple offers over asking price without any concessions was the norm for some time . . . first one of these we have seen in a long time.  

How would you respond to the offer?  The rest of it is acceptable but 6% in concessions?

Thanks

[Dave Skow]

@Andy Sabisch- asking for  seller concessions is  very  normal now ....what will the buyers  ltv  be ?  and will they  be  buying it  for a  inv  property or as  primary ?  the  amount of a seller  contribution  is capped  by lenders ....eg.  if they plan to put  less than  20% down and  live in it - a  6% contributuin wont be allowed 

[Andy Sabisch]

Quote from @Dave Skow:

@Andy Sabisch- asking for  seller concessions is  very  normal now ....what will the buyers  ltv  be ?  and will they  be  buying it  for a  inv  property or as  primary ?  the  amount of a seller  contribution  is capped  by lenders ....eg.  if they plan to put  less than  20% down and  live in it - a  6% contributuin wont be allowed 

Dave, He is going VA and provided a pre-approval in the amount of the purchase price.  He only put $300 down for and EMD.  It looks like it is a primary property purchase.  6% is a bit steep . . . what would  you counter with . . . was going to contact the closing attorney to see what the closing costs and pre-paids amounted to . . . having an "up to" in front of the amount would be preferrable

[Dave Skow]

I dont do a ton of VA loans but I think max credit allowed is 4% of the price ...so if he is asking for more than that - he will not be able to use all of that amount ....if he has a realtor or lender - ask them to forward a copy of his LE ( loan estimate ) so you can see all his costs .....you can ask his lender what the max usable credit is as well .....my guess is that he has very little money and is trying to get into the property with min amt ....as a seller you are already required to pay many of the buyers costs ( escrow / loan fee / title /inspection

[Andy Sabisch]

Quote from @Dave Skow:

I dont do a ton of VA loans but I think max credit allowed is 4% of the price ...so if he is asking for more than that - he will not be able to use all of that amount ....if he has a realtor or lender - ask them to forward a copy of his LE ( loan estimate ) so you can see all his costs .....you can ask his lender what the max usable credit is as well .....my guess is that he has very little money and is trying to get into the property with min amt ....as a seller you are already required to pay many of the buyers costs ( escrow / loan fee / title /inspection

I plan on calling the closing attorney tomorrow to get the closing cost sheet . . . thanks

[Dave Skow]

Good idea 

[Steve Vaughan]

They will probably ask to buy down the rate. Thats what I'd ask for as a buyer getting a loan.

VA also has a substantial funding fee unless they have service-connected disability of like 20% or higher .

[Eliott Elias]

That is unfortunately the state of the market now, concessions are common and no one is getting multiple offers.