BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
I need to reduce the price of my property for sale. A reduced list price means I'm paying less in Capital Gains Taxes. How would a "Credit at Closing to help with Buyer's Closing Costs" come into play?
Does this also reduce the amount of Capital Gains Tax, since it is less money I am receiving?
Investor · Manasquan, NJ · Member since 2019 · 70 posts · 38 votes
4y
I just had this conversation with my buyer. The difference between Concession vs Credit.
My buyer had repairs that came up during the home inspection. He wanted some cash at closing from the seller. I told him to ask for a seller credit, which is cash at closing from the seller. The attorney wrote up the addendum and asked for a Seller Concession. I caught the error. This is not what he wanted. A Concession is a reduction in the purchase price. I asked my buyer to double check with his attorney why the attorney wrote "concession" in the addendum. Ultimately, the addendum was updated to be a seller credit to the buyer.
Example Selling Price: $400,000
Concession: $5,000 -- Selling Price at Closing: $395,000.
Credit: $5000 -- Selling Price at Closing: $400,000 // Seller Brings check for $5,000 to closing.
I am not a CPA or tax expert, however my understanding is, your net gain, less your cost basis (purchase + expenses) would be subject to capital gains tax. So if you are giving a credit to the buyer, that would come out of your net gain and reduce your capital gain. I am sure there are far more qualified tax experts than me who can chime in or add to this conversation!
Investor · Manasquan, NJ · Member since 2019 · 70 posts · 38 votes
4y
I just had this conversation with my buyer. The difference between Concession vs Credit.
My buyer had repairs that came up during the home inspection. He wanted some cash at closing from the seller. I told him to ask for a seller credit, which is cash at closing from the seller. The attorney wrote up the addendum and asked for a Seller Concession. I caught the error. This is not what he wanted. A Concession is a reduction in the purchase price. I asked my buyer to double check with his attorney why the attorney wrote "concession" in the addendum. Ultimately, the addendum was updated to be a seller credit to the buyer.
Example Selling Price: $400,000
Concession: $5,000 -- Selling Price at Closing: $395,000.
Credit: $5000 -- Selling Price at Closing: $400,000 // Seller Brings check for $5,000 to closing.
I just had this conversation with my buyer. The difference between Concession vs Credit.
My buyer had repairs that came up during the home inspection. He wanted some cash at closing from the seller. I told him to ask for a seller credit, which is cash at closing from the seller. The attorney wrote up the addendum and asked for a Seller Concession. I caught the error. This is not what he wanted. A Concession is a reduction in the purchase price. I asked my buyer to double check with his attorney why the attorney wrote "concession" in the addendum. Ultimately, the addendum was updated to be a seller credit to the buyer.
Example Selling Price: $400,000
Concession: $5,000 -- Selling Price at Closing: $395,000.
Credit: $5000 -- Selling Price at Closing: $400,000 // Seller Brings check for $5,000 to closing.
Isn't it that Buyer gets $5,000 back of the $400,000 he paid for the property at closing in cash-unless Seller doesn't have the equity and has to bring a check.
