Michigan Foreclosure Purchase: Seller’s Concessions and Closing Costs
First, why would you want concessions? Well if you refer to my other blogs about closing costs, you will see all the various closing costs and pre-paid items involved with obtaining a mortgage. All of these costs will need to be paid at the closing table. The financing you are obtaining will most likely not allow you to include these in your loan amount. Most mortgage programs will not allow your loan amount to go over the purchase price.
In fact, there is only one viable mortgage program left that will allow you to roll your closing costs in without seller’s concession. Depending on your financial situation or your ability to leverage, you may not want to bring all of this money to the table to close. The concessions provide a way for the seller to pay them as a part of the transaction. Ultimately, you are still paying for them as a part of your purchase price, but with concessions you will be paying them over the course of 30 years instead of paying them upfront.
Free money? Awesome! Few things in life are free, and closing costs are not one of them. The seller of a property may agree to pay in part or all of your closing costs as an incentive for purchasing their property over others. The seller is lowering their net gain from the sale to pay your closing costs. Still, this is a part of your negotiation when making an offer on a property.
Still seems perfect, any negatives? To use simple math- if your purchase price is $100,000 and the seller gives you $6,000 in concessions; instead of receiving $100,000 from the sale, they will get $94,000 since the $6,000 went to your costs. If someone bid on the same property at $100,000 with only $5,000 in concessions: the seller gets more money from the second bid and you lose. Also, if you are the only bidder but $94,000 is than the seller is willing to take, they may negotiate a higher purchase price for you in order to include the concessions. In this scenario- let’s say that the seller will not accept less than $96,000 to take away from the sale. They may negotiate this to have a purchase price of $102,000 and pay up to $6,000 in closing costs, making their bottom line $96,000.
Decisions, Decisions. It’s not really all that complicated. Is the change in monthly payment worth not having to spend the cash? Is the money in your pocket able to bring in more than the extra payment amount going out? The answer to that, is the answer to your concession conundrum.
For more in-depth help or answers, go to our website:
www.iconmortgagelending.com
In fact, there is only one viable mortgage program left that will allow you to roll your closing costs in without seller’s concession. Depending on your financial situation or your ability to leverage, you may not want to bring all of this money to the table to close. The concessions provide a way for the seller to pay them as a part of the transaction. Ultimately, you are still paying for them as a part of your purchase price, but with concessions you will be paying them over the course of 30 years instead of paying them upfront.
Free money? Awesome! Few things in life are free, and closing costs are not one of them. The seller of a property may agree to pay in part or all of your closing costs as an incentive for purchasing their property over others. The seller is lowering their net gain from the sale to pay your closing costs. Still, this is a part of your negotiation when making an offer on a property.
Still seems perfect, any negatives? To use simple math- if your purchase price is $100,000 and the seller gives you $6,000 in concessions; instead of receiving $100,000 from the sale, they will get $94,000 since the $6,000 went to your costs. If someone bid on the same property at $100,000 with only $5,000 in concessions: the seller gets more money from the second bid and you lose. Also, if you are the only bidder but $94,000 is than the seller is willing to take, they may negotiate a higher purchase price for you in order to include the concessions. In this scenario- let’s say that the seller will not accept less than $96,000 to take away from the sale. They may negotiate this to have a purchase price of $102,000 and pay up to $6,000 in closing costs, making their bottom line $96,000.
Decisions, Decisions. It’s not really all that complicated. Is the change in monthly payment worth not having to spend the cash? Is the money in your pocket able to bring in more than the extra payment amount going out? The answer to that, is the answer to your concession conundrum.
For more in-depth help or answers, go to our website:
www.iconmortgagelending.com
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