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Answers (4)
- Drew Ludlow, "DrewLudlow"
- Contributions:505
Simply put... the $10,000 would come from the Seller's net proceeds at the time of closing.
There is no 'cash' involved. Rather, the closing attorney subtracts $10k from what would be given to the seller, gives it to you (on paper) and then that 'paper' shows the $10k going to whatever costs you have incurred up to $10k.
As Chris said... it is an accounting game. The $10k flows through the process from the Seller to the actual recipiants.
There is no 'cash' involved. Rather, the closing attorney subtracts $10k from what would be given to the seller, gives it to you (on paper) and then that 'paper' shows the $10k going to whatever costs you have incurred up to $10k.
As Chris said... it is an accounting game. The $10k flows through the process from the Seller to the actual recipiants.
- Chris O'Connor, "CallChrisToday"
- Contributions:269
When you hear of the seller paying all or part of the buyers closing costs it is all semantics or word games. The reality is the seller isn't paying a penny of the buyers closing costs. The phrase really means on the HUD-1 Settlement Statement, at closing, the buyer's closing costs appear on the sellers side. "Seller Concessions" are an accounting game.
So here is how it works. If you don't have the money to pay your own closing costs you raise the price of the house by the amount of your closing costs. Now the seller is receiving a higher price. And then the accounting game happens. The HUD-1 Settlement Statement reflects the seller as paying your closing costs. In reality you are getting a larger loan to cover the higher contract price, so you're therefor financing your closing costs. Make sense?
And as a previous poster said be careful with this approach. If a house is worth $200,000 and you agree to buy it for $195,000 you won't have a problem. As long as you are paying your own closing costs the appraisal only needs to come in at the contract price of $195,000. But the moment you cannot or do not want to pay closing costs the contract price is now raised by oh let's say $10,000. So now the home has to appraise for $205,000 and not $195,000.
Many deals fall apart these days because buyers are asking for the seller to pay their closing costs. And then the property doesn't appraise for the inflated value.
So here is how it works. If you don't have the money to pay your own closing costs you raise the price of the house by the amount of your closing costs. Now the seller is receiving a higher price. And then the accounting game happens. The HUD-1 Settlement Statement reflects the seller as paying your closing costs. In reality you are getting a larger loan to cover the higher contract price, so you're therefor financing your closing costs. Make sense?
And as a previous poster said be careful with this approach. If a house is worth $200,000 and you agree to buy it for $195,000 you won't have a problem. As long as you are paying your own closing costs the appraisal only needs to come in at the contract price of $195,000. But the moment you cannot or do not want to pay closing costs the contract price is now raised by oh let's say $10,000. So now the home has to appraise for $205,000 and not $195,000.
Many deals fall apart these days because buyers are asking for the seller to pay their closing costs. And then the property doesn't appraise for the inflated value.
- DonaldStallman
- Contributions:1
that still does not explain where the $10,000 concession come from?
- Peter McGuinn, "petermcguinn"
- Contributions:158
You would add the amount needed to what the seller has agreed to net but be careful not to over inflate this amount because you may have an appraisal issue. Example: Seller wants to net $250K and you need $10K in closing cost so you would write a contract for $260k with the seller's concession to the buyer being $10K.
how does a seller's concession work?
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