Seller's Concessions on Purchase Offer....

[G-Mac]

So...I am selling my two family rental property to one of the tenants. We're not going through a Real Estate company. I'm selling direct. She told me that her bank approved her for a mortgage for the purchase price. I retained an attorney who has an office in the small town that I live in. I did this over the phone. I have never actually met him and have been dealing with a woman that assists him. She told me that the first step was for the buyer's attorney to submit a purchase offer. My tenant retained an attorney and he did that.

Now, here's the kicker....the offer submitted was for $9,600.00 more than the agreed upon sale price. They checked a box marked "Seller's Concessions" and said that this was to assist the buyer with closing costs. The concession was for that exact amount.

The woman at my attorney's office said that she has seen this before, usually when the buyer can't come up with the closing costs. I've never sold a house before so I didn't realize that this was an option for buyers. Silly me, I thought you needed money to buy a house.

I guess as long as I only have to pay capital gains taxes on the agreed upon selling price and not the inflated amount I'd be OK with it.

 

[old bear]

Sorry I don't understand what you are expected to do with the additional monies. Are you expected to return it to she buyer after closing? All I can say is, if you are not happy with the deal refuse the offer and walkaway. Right now it is a sellers market.

 

[walkinghorse]

Two houses ago, I had this happen. Never seen it before, but according to the attorneys and our real estate agent and broker, nothing to worry about as long as the amount remains consistent with appraisal.

 

[Onomea]

• the offer submitted was for $9,600.00 more than the agreed upon sale price.
• They checked a box marked "Seller's Concessions" and said that this was to assist the buyer with closing costs.
• The concession was for that exact amount.

Does not make sense to me.

A seller's concession in this case would be you, as the seller, reducing your asking price by $9,600. If your buyer is trying to ask you to reduce your price, in order to help with the buyer's closing costs, the offer should be $9,600 less than your asking price.

If your description above is indeed accurate, and the offer exceeds what you are asking, go ahead and accept it. See what happens.

I think your buyer's lawyer made a mistake, and she will beg you to let her revise her offer by reducing it by $19,200.

For what it's worth, a seller's concession, reduced price, is typically to cover items that need fixing as discovered in the buyer's inspection of the property.

 

[glenwolde]

I've seen it before, it's a common tactic. Sometimes it's the plan all along. Sometimes something comes up at the last minute and they don't want to redo all the paperwork. But I'm no real estate mogul.

 

[G-Mac]

Does not make sense to me.

Yeah, it doesn't make 100% sense to me either. Also, I'm not sure that I picked the right lawyer. Due to time constraints, and wanting to use somebody local, I retained him over the phone....yet, I've only spoken to his secretary and the assistant. She told me that "Dan", the attorney, did look over the Purchase Offer. I'm going to call my accountant and run this by him too.

 

[Rob613]

Perfectly normal and happens all the time, she's basically financing her closing cost by offering 9600 over asking, then asking for that 9600 back in concessions.

It's not a very sound financial move on her part but if she doesn't have the money to close, it's a common way to do it.

 

[Onomea]

That makes sense, Rob. Now I get it.

 

[johngross]

Perfectly normal and happens all the time, she's basically financing her closing cost by offering 9600 over asking, then asking for that 9600 back in concessions.

It's not a very sound financial move on her part but if she doesn't have the money to close, it's a common way to do it.

I agree. YOU are paying the closing costs but she is "giving" you the money to pay them via adding the 9,600 to her bank loan. But check with "Dan" to be sure .

Also, an internet search turned up this.

A Guide To Seller Concessions | Rocket Mortgage

 

[pharmer]

YOU are paying the closing costs but she is "giving" you the money to pay them via adding the 9,600 to her bank loan.

And the "extra" $10K added to the note will raise the monthly nut by about $20 at today's rates. Good business both ways. Joe

 

[LoboGunLeather]

The fly in the ointment may come when the appraisal report is completed. Mortgage lenders do not generally lend more than the property is worth, so a low appraisal could put you in the position of a busted deal or feeling pressured to reduce your sale price to the appraisal amount. Your buyer has essentially disclosed that she has no money for closing costs, so you would probably be expected to pay those as concessions, further reducing your net proceeds of sale.

As long as the appraisal is at or above the purchase contract price you should be okay.

One thing that is difficult for me to understand: With two lawyers involved in the transaction how can you be saving anything by not utilizing a real estate broker?

Our family attorney charges us $250 per hour for routine stuff (wills, contracts, etc), after nearly 30 years of taking care of our needs. I think his regular hourly rate is now $375.

You have one lawyer working for you. Buyer has a lawyer representing her. There will also be a title insurance company and/or an escrow agent. All of them will expect to be paid, and all of them will know exactly how much money is on the table.

Willing buyer and willing seller already in basic agreement, a good real estate broker would probably jump at that opportunity for a nice reduced commission.

 

[CAJUNLAWYER]

Make sure that the buyer understands that the if the closing costs are less than the $9.600 the buyer isn't getting a refund. In fact the regulations prohibit such things. Quite frankly, I don't like these things as it results in an overall increase in housing prices. Theis use basically screws buyers in the long run as it acts as an artificial inflator of the housing market. Good for the sellers though. As long as the appraisal works out

 

[G-Mac]

One thing that is difficult for me to understand: With two lawyers involved in the transaction how can you be saving anything by not utilizing a real estate broker?

We're each paying for our own lawyer. Mine is charging me a flat fee of $750. At least that's what his assistant quoted me. Real estates around here charge 6% to 8%. I figued I was saving money by not going through a real estate. Now, a real estate brokers, that may be a different story that I hadn't thought of...and I do know one.

 

[len917]

If you used a real estate agent, you would be paying commission on the total amount including the $9600.
The $9600 closing costs should include the title company and title insurance, filing fees, state tax on home purchase, etc.
Your capital gains would not change because the $9600 can be deducted by you as an expense in selling the house. Don't forget that your state may also tax you a % of the sale of the house as as exit fee.
Next time, try to find an attorney that is recommended to you.

 

[Nightowl]

My guess is that you will be paying taxes on the additional $9600, that you never see! So while its a wash for the closing, you have to pay for the deception. Check with an accountant.

 

[hsguy]

I went through the exact same scenario a few months ago. The seller offered over the listing price but I had to pay their closing cost equal to their excess offer. I did sell it through a broker as I was not interested in showing it myself due to medical issues but was completely pleased with the result. It sounds like you are in a great position! Worked out perfectly and I sold the property for exactly what I wanted in pocket. Your lawyer should be able to explain it to you. Good luck on the sale!

 

[hsguy]

My guess is that you will be paying taxes on the additional $9600, that you never see! So while its a wash for the closing, you have to pay for the deception. Check with an accountant.

As I recall I did not pay tax on the excess amount, only on the actual amount received per the closing statement. Consulting your accountant is good advice though. My memory may be faulty and I am not a tax professional so any advice I offer is worth exactly the price you paid for it.