6% Concessions and 4% Commissions.
Shiloh LundahlPro Member
Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes6% Concessions and 4% Commissions.
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votesIt's been a while since I flipped homes, but I would see a lot of seller-assist concessions similar to what was proposed in your transaction. They were generally used as a tool to reduce the cash required to close. I was shocked when I reviewed the buyer financial disclosures that accompanied the offers, although the offers were also accompanied by legitimate preapprovals. I couldn't believe how some of these buyers actually qualified, as they literally didn't have enough money to purchase dinner after settlement. But the loan originators didn't care. They knew what was required to approve the buyers for the loans, and those loans were often sold to a servicer by the time the ink dried on the deed. I saw this most often with FHA-type transactions, where the buyers were strapped for cash and were coached up on how to structure the transaction to qualify for a mortgage.
I also learned that buyers at this price point were very sensitive to property condition, and home inspection reports could lead to repair addendums that read like novels. Luckily, my properties were renovated by solid subcontractors, with permits, and generally produced relatively clean inspection reports. However, I encountered many buyers who had terminated prior transactions because of inspection issues and an impasse with the property owner over which repairs would be made.
This is why I've been so vocal on the message boards, particularly with the BRRRR SFH buyers who believe they are sitting on a ton of equity buying homes in markets that would attract this type of buyer should they sell because the transactional costs can easily total 15%+ between broker fees, seller concessions and repair addendum requirements and its rarely accounted for in underwriting.
8 Replies
- 1moStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
It's been a while since I flipped homes, but I would see a lot of seller-assist concessions similar to what was proposed in your transaction. They were generally used as a tool to reduce the cash required to close. I was shocked when I reviewed the buyer financial disclosures that accompanied the offers, although the offers were also accompanied by legitimate preapprovals. I couldn't believe how some of these buyers actually qualified, as they literally didn't have enough money to purchase dinner after settlement. But the loan originators didn't care. They knew what was required to approve the buyers for the loans, and those loans were often sold to a servicer by the time the ink dried on the deed. I saw this most often with FHA-type transactions, where the buyers were strapped for cash and were coached up on how to structure the transaction to qualify for a mortgage.
I also learned that buyers at this price point were very sensitive to property condition, and home inspection reports could lead to repair addendums that read like novels. Luckily, my properties were renovated by solid subcontractors, with permits, and generally produced relatively clean inspection reports. However, I encountered many buyers who had terminated prior transactions because of inspection issues and an impasse with the property owner over which repairs would be made.This is why I've been so vocal on the message boards, particularly with the BRRRR SFH buyers who believe they are sitting on a ton of equity buying homes in markets that would attract this type of buyer should they sell because the transactional costs can easily total 15%+ between broker fees, seller concessions and repair addendum requirements and its rarely accounted for in underwriting.
- 1moJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
virtually every offer at that price point will have seller concessions .. buyers need the closing cost money.. although most commish are 2 to 3% not 4. I would push back on the commish.. but from what I see with myself and my clients seller concession to first time or buyers at those prices points is Standard operating procedures virtually every one of them will have seller paid closing cost and loan charges.. now when things were better one would just raise the price by what the concessions are and that would fly apprasiser would allow the extra price without dinging the value. Very surprised yoiu have not seen this before.
- 1moNoah CorwickPro MemberRealtor · Phoenix, AZ · Member since 2021 · 276 posts · 117 votes
Hi Shilo,
Unfortunately homes in that price range tend to need "extra help" to actually get it funded and the buyer in a place to be able to afford the purchase.
IMO definitely push back on the commission. If they truly need more concessions to make the deal happen, that should eat into the agent's commission. 4% is already higher than the typical high of 3% as well.
Also I'd confirm if the buyer is buying with a Conventional loan. If so and they are putting less than 10% down, the max concession amount that they can get is 3%.
Best of luck!
- 1moTravis TimmonsPro MemberRental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
So long as it will appraise, I'd suggest increasing the price by 5-10k and give 5-10k in concessions/cash at closing. It's the FHA/5% down first time buyer crowd buying a $300-400k house with $7k of cash somehow. We sold one last year almost exactly at that number - $360k but technically it was a $365k transaction with $5k in credits (house was listed at $360k). I'll second what @Stuart Udis said - that deal almost fell apart over a $200 repair. It was a first time homebuyer that freaked out at everything on the inspection report.
Had another one about 10 years ago at $275k - same deal. It's funny that they and their inspector missed the fact that we had a 23 year old AC unit hanging on by a thread in Houston but lost it over a 2 foot section of rotted wood on fascia boards.
- Coral Springs, FL · Member since 2018 · 495 posts · 115 votes1mo
Stuart nailed it — 15%+ in transactional costs is the real number, and almost nobody underwriting deals on the MLS actually accounts for it. Let's do the math on Shiloh's deal:
• 6% concessions on $380K = $22,800
• 4% commission = $15,200
• That's $38,000 in friction before you even get to repair addendums, appraisal gaps, or the buyer who flakes over $200 in inspection items (Travis, your AC story is painfully common)
You're literally paying 10% of the transaction value just to get past the negotiating table. And that's BEFORE the buyer's lender requires repairs, the appraiser comes in short, or the inspection spawns a second round of negotiations.
This is why I've shifted almost entirely to tax deed auctions. The entire friction stack disappears:
• No agents = no commissions
• No buyer = no concessions
• No inspection contingency = no repair addendums
• No lender = no appraisal
• No negotiations at all — you bid what you want, pay what you bid, close in 30 days
The discount that would have been eaten by friction stays in your pocket. In Broward County, FL, Auction #113 is October 26 with 16 properties — condos, commercial, land — most assessed at $200K-$400K+ that you can acquire at 50-70% of assessed value. The county hands you clear title, the winning bid is the price, and there's nobody to negotiate with.
For flippers doing $300K-$400K deals, that $38K in transactional savings alone could be your entire rehab budget on a tax deed acquisition. The profit really is made at the buy — and tax deeds let you keep all of it. - Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes1mo
It has been a while since I have seen that, like others, but beyond the 4% commission, I echo others experiences. The more entry level price you get to, the more you get buyers needing help.
The upside to this price point is, at least where I flip, I get into multiples more often than not and can push the price from demand. And that helps when it comes to appraisals too, since I will meet the appraiser with full list of improvements, before and after pictures, my own comps, and the front page of all the offers I got, showing it wasn't just one buy looking to pay that price for the house, especially if I start getting into a price point that is harder to justify with the immediate comps.
- 1moGregory AcsPro MemberLender · MD · Member since 2025 · 250 posts · 96 votes
I’d look at the net proceeds rather than just the headline offer price. A higher offer with large concessions can end up being less attractive than a lower, cleaner offer. I’d also consider the strength of the buyer and the likelihood of closing before deciding whether the extra concessions are worth it.
- 1moMason WeissBusiness MemberRealtor · Phoenix, AZ · Member since 2021 · 524 posts · 241 votes
No lol, that's crazy.
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