Housing Market

June 11, 2018

Buyer & Seller: 6 Things To Know About Negotiating Seller Credits

Christopher Ulrich

Vice President, Mortgage Lending

You found the perfect home. It’s exactly what you’ve been looking for. It sits on a cozy street in a safe neighborhood within a great school district. There was some negotiating on price, but in the end the seller accepted your offer. Finally, you can rest easy as you’ve come to terms with the seller for your dream home! Or have you?

Whether it’s during those initial negotiations or after the offer is accepted, there are still several reasons why negotiating a seller credit is not uncommon. Here are a few things that every buyer and seller should know when it comes to seller credits.

1. Buyers and sellers; A credit is a useful way for the seller to market their home and useful for the buyer who may not have the cash needed for closing costs.

As a seller, you know the lowest you’ll take for your home. You likely listed your home a bit higher than what you’re willing to take because you know buyers will offer you less. Hypothetically, let’s say you list your home for $315,000 and you know the least you’ll take is $300,000. As a seller you could market the home with a $5,000 seller credit towards closing costs, discount points, or a buydown to lower their interest rate, and it still leaves room for negotiating. There is no difference whether you sell the home for $300,000 with no credit or for $305,000 and give a $5,000 concession. You are still netting your $300,000.

As a buyer for the same scenario above, you can contract on the home with a seller credit of any dollar amount. The seller may or may not budge. It’s very common to negotiate credits with your offer, but if it’s a competing offer situation, you may not look like the strongest buyer. Your realtor will know the best way to approach the situation.

2. Buyers may request credits for property inspection items.

In the early days following the accepted contract you will have your attorney review period in which you typically have 5 days to have a home inspection completed. It is within this time frame that you must notify the seller or seller’s attorney of any defects for which you request the seller to cure. Whether it’s sewer line, roof, water heater or electrical issue, it is VERY common for further negotiations to take place. The seller may have to fix these items prior to closing, but if the issue doesn’t affect the safety or habitability of the home, you may request a credit in lieu of the seller fixing the item themselves.

3. Sellers can avoid credits for inspection issues by fixing the problems themselves.

Sellers should consider having a property inspection before listing the home. As the seller, your goal is obviously to avoid anything that will impact your bottom line, giving you the most sale proceeds as possible. By having a home inspection prior to listing your home, you might find a few items that you weren’t aware needed to be fixed. Some of these items might be so minor that you can fix them yourself. For any larger items like a failing furnace or a roof near the end of it’s life will likely be caught by the buyer’s inspection. Having the inspection completed up front will give you some extra time resolve major issues.

By making the inspection report available to buyers, it can also be a good way to show good faith to those considering to purchase your home that you have taken additional steps to assure a safe home without any major issues.

If you have an inspection, or otherwise assuring that your property is in great shape, you could request the home to be sold “as is”. This sends a strong message to any buyers that the you aren’t open to further negotiations once the contract is executed.

4. Buyers, be reasonable.

You made an offer on a home, negotiated back-and-forth with the seller. Finally, you’ve come to an agreement. Don’t just concede to the purchase price thinking that you can get an additional concession after a property inspection.

You may be weeks into the process, completed a series of inspections and feel that the seller has mentally committed to moving. This doesn’t mean the seller has to accept any credit requests. If you can’t come to terms during the attorney review or you request an unreasonable credit, the seller may very well call your bluff and terminate the contract, especially in a seller’s market.

5. Sellers, be reasonable.

You may have come to terms on your home sale at a fair price, but it doesn’t mean the buyer has to go through with the deal. They can still cancel within the attorney review. They agreed to your price assuming there are no inspection issues. If the buyer cancels the deal because of a safety issue or other major defect, chances are that the next buyer that comes along will likely find the same issue and request that it be cured. Save yourself the trouble of relisting the home, going through the negotiations all over again and eventually running into the same issue by just resolving it the first time.

6. Buyers nearly always ask for credits, so sellers should leave room for further negotiations.

Sellers should cushion their final sales price because buyers typically ask for credits once they complete their home inspection. They will likely come back with a concession request, even if there aren’t any major issues. Leaving yourself a little room will give you the ability to meet some of their requests and you’ll feel better about “giving in” to them.

The last thing you want is to be blindsided, unexpectedly giving up a couple thousand dollars after thinking the deal is finally done. If you have any further questions about this process, contact me here or at 708-531-8324. If you’re looking for more information about the mortgage process, visit our FAQ page.

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