A lot of Lehigh Valley Home Buyers need some type of Sellers Assist (also known as sellers concession) when purchasing a home. The home buyer has saved up money but just doesn't have enough to cover the down payment plus the closing costs.
Sellers Assist CANNOT be used towards a buyer's down payment but it can be used to cover almost all of the closing costs.
Conventional mortgages usually allow for up to a 3% sellers assist of the purchase price to be used towards closing costs. FHA, VA, and USDA mortgages allow up to 6%. Depending on the purchase price, closings costs usually run from 4-6% of the purchase price.
There are three major problems that can occur when an offer on a home contains sellers assist.
The home was just listed two weeks ago for $200,000. The buyer submits an offer and is willing to pay full price but needs 6% sellers assist. 6% of $200,000 is $12,000 dollars. If the buyer makes a full price offer but requests a 6% sellers assist, the sellers will actually be offered $188,000 ($200,000 - $12,000).
If the buyer definitely needs the sellers assist, the seller can accept the offer or they can counter with something like "We'll give you the 6% but at a purchase price of $205,000". Going above the list price always brings in an appraisal concern (more on that later).
Okay, the buyer and seller come to terms on the price and sellers assist (Problem 1 solved).
Now, the buyer gets the inspections done. There are some needed repairs to the home. The home buyer submits an inspection reply to the seller asking the seller to pay for and have the problems corrected.
The seller gets upset and isn't willing to do the repairs. "I am already giving them 6% towards their closing costs!!" is a common reply.
So, the buyer has a seller that is willing to give them 6% sellers assist but won't do any repairs. Will the buyer make out better putting an offer on another home? What if that home seller has the same attitude?
The buyer ends up asking the seller for a smaller subset of needed repairs. The seller agrees and the purchase is moving forward (Problem 2 solved).
The bank orders the appraisal. Is the home worth the price the buyer is paying for it? Are there any needed repairs (the appraiser is the eyes and ears for the bank)?
Hopefully, the home will appraise at the purchase price with no repairs.
If the Lehigh Valley Home under appraises (the appraised value is below the purchase price) or has required repairs another obstacle must be overcome between the home buyer and seller.
If the home appraises for less than the purchase price and the buyer definitely needs the asked for sellers assist, the only option the home seller has is to accept less for the home.
If the lender requires any repairs, these must be done before closing or else the buyer will not get the loan. Either the buyer or the seller will need to do the required repair(s).
If the everything is okay with the home appraisal or can be worked out then you are on your way to closing on the house (Problem 3 solved).
For all of your Lehigh Valley Real Estate information, visit www.lehighvalleyhomesonline.com
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