Cheat Sheet for Seller Credits Thumbnail

With the close of the NFL season, I began thinking about how I could provide something to help the game plan of my customers and the housing professionals they work with. In today’s market, with seller concessions reaching record high, I think it makes sense to provide a quick seller credit cheat sheet so that you know what to expect from sellers when buying a home.

This will also give Real Estate Agents an idea of how much they can ask for during negotiations. You can see that information in the chart below. This breaks down how much you can expect to get in a seller credit for just about any transaction you will be involved in.

Let’s now discuss what this chart may mean for you and what makes today’s market a great time to negotiate terms in your favor.

Chart of seller concession limits by loan program.

How Do Seller Concessions Work

As the name suggests, seller concessions are when a seller concedes to paying some portion or aspect of the expenses that come with purchasing a home. Sometimes, a buyer might ask that a seller pays for specific costs, such as the lender origination or appraisal fees. They could also cover closing costs, pay for a temporary rate buydown and other prepaid expenses, or even direct price cuts on the home.

Concessions are often offered when it’s a buyer’s market, and sellers feel pressured to sell quickly. Maybe one of the most common causes are to cover repair or general maintenance issues that turn up during the inspection process – malfunctioning appliances, for example.

It’s a good idea to let Real Estate Agents negotiate concessions as they have a better understanding of the market and what they can ask for without souring the deal, so to speak.

Today’s Buyer’s Market

A recent Redfin report titled “A Record Share Of Home Sellers Are Giving Concessions To Buyers,” found that in the last quarter of 2022, 41.9% of home sellers offered concessions. In line with what I’ve written above, these concessions included temporary rate buydowns and repair money. Altogether these have helped many homebuyers save thousands on the cost of a new home.

What makes this even more noteworthy is that these numbers represent the highest increase of any three-month period since Redfin started tracking this data in July 2020.

Backed by the data and from personal experience, I can say that in today’s market, it’s easier to get sellers to cover some closing costs or much of the closing costs than it has been in probably a decade or more.

Your Cheat Sheet Breakdown

With seller concessions as frequent as they are, why not leverage that to get a great deal? Let’s look again at the cheat sheet to see what is possible.

Conventional: you’ll see that the contribution type that buyers can expect in a conventional loan depends on the occupancy type. That is, whether it’s owner-occupied or a second home versus an investment property.

FHA and VA: For these federally backed loan programs, the focus is more on primary homes, which is simply a by-product of those programs being almost exclusive to primary homebuyers to begin with.

Jumbo: Jumbo loans are interesting because Homebridge offers around fifteen to twenty options on jumbos. They’re each proprietary, so some will allow for more concessions while others won’t allow any at all.

The general rule of thumb is that you can get 3% of seller credit and that’s probably going to be pretty robust on any general loan transaction.

Concessions Contributing To Rush Back To The Market

As of this writing, our northwest region has had about a 70% to 75% pickup in pre-approvals month-over-month. Though there hasn’t been a lot of media attention, there’s a little groundswell of buyers returning to the market to take advantage of factors like seller concessions and low competition. Buyers seem to be getting prepared for the spring season, and I think we’ll see a convergence of many factors.

Between home prices stabilizing and interest rates coming down from where they’ve been – which I believe we’ll continue to see going into the second, third and fourth quarter – we’re likely going to have a nice second half of this year and hopefully even at the second quarter and beyond.

All of this means that getting into the market early on is a great idea, allowing you to make the most of opportunities before the competition hits.

If you’re still unsure how to make a home purchase work for you, I’d love the chance to discuss your situation and if now is a good time for you to buy. Feel free to contact me at any time.


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