Realtor Tip of the Week: The Math on Reducing Sales Price vs Closing Cost Concessions

 

Buyers often want to offer less than the sales price, but in almost every case, that may not be the wisest move if they are financing the home.

 

Instead of asking for price reductions, ask the seller to pay for closing costs! This actually saves your buyer more money. Here’s an example:

 

They want to purchase a $600K house and have 10% down. The seller will negotiate $25K towards the buyer.

 

1. Take $25K off the price: 10% down off the negotiated price of $575K= a $517,500 mortgage with a $3102/mo P&I payment at 6% for 30yrs. Your buyer will still have about $18K in out of pocket closing costs.
2. Use the $25K to pay for closing costs. The seller pays all the closing costs AND buys the rate lower! So, the loan is $540K at 5.5% on 30yrs or $3066/mo P&I.   The payment is lower AND your buyer saved $18K!!

 

The seller still nets the same, but going with Option 2 is a win/win. Here’s why: buyer gets a lower payment with less money out of pocket and the seller gets his asking price which is psychologically appealing.

 

Obviously, if you represent the seller, you can counter in the same manner: instead of conceding the sales price, offer to cover closing costs! That keeps your list price intact.

 

Feel free to pass this along!

 

Thanks!
Joel

 

 

Joel Richardson​​​​ SVP ‑ Central Texas Mortgage Manager, Austin VeraBank, N.A. P: 512-222-0140   EXT. 7740  |  877-566-2621  M: 512-203-8244 E: jrichardson@verabank.com  |  W: myfinanceteam.com A: 1111 W. 6th Street, Bldg B, Suite 200 ,  Austin ,  Texas   78703 NMLS # 136881 This electronic message, including any attachments, is intended only for the use of the individual or entity to  ​which it is addressed and may contain information that is confidential and/or legally privileged. IF YOU ARE NOT  ​THE INTENDED RECIPIENT, OR AN EMPLOYEE OR AGENT RESPONSIBLE FOR DELIVERING THE COMMUNICATION  TO THE INTENDED RECIPIENT, BE AWARE THAT ANY REVIEW, DISCLOSURE, COPYING, PRINTING, DISTRIBU‑ ​TION OR USE OF THE CONTENTS OR ATTACHMENTS CONTAINED HEREIN IS STRICTLY PROHIBITED. If you have ​received this electronic transmission in error, please notify me by telephone (903) 657‑8521 or by returning the  ​transmission via electronic mail immediately and permanently delete the message from your system(s).