As a buyer in a competitive market, it is difficult to make your offer standout, particularly if you need the seller to bend on things they might be asking for. Remember the days of waiving all contingencies on an offer to compete with other buyers? Unfortuantely, we are not out of the woods yet and there are many markets out there where this is still the case. Today I want to talk about a strategy you can use as a buyer to come to an agreement with a seller. 

Seller credits, a specific amount of money the seller gives to the buyer at closing, can be very advantageous to the buyer to offset some of the costs associated with buying a home. This is especially true when buying a home that needs repairs or a specific capital expense, with this strategy the seller can sweeten the deal for buyers to address those issues and buy the home. 

This is not only true for homes that need repairs, but it can also be applied to pay down your interest rate. So the obvious question is, why not just knock the money off the purchase price?

The reason this is such an effective negotiation tactic, is that contrary to lowering the purchase price, which may only reduce your payment by a negligible amount of money, lowering your rate could reduce your monthly payment by hundreds of dollars. For example, $10,000 off the purchase price of a 300K home may only change your payment by about 70-80 dollars a month. $10,000 used to lower your rate on the same home could lower your monthly payments by almost 300 dollars. This is huge. Even if you’re not looking for seller credits to make repairs, seller credits can also cover your closing costs, drastically reducing what you pay upfront at closing. You can even ask the seller to  increase the purchase price (let’s say 10K) and then have them credit the increased portion (10K) to cover closing costs. Even though you’re paying a higher purchase price, it is rolled into the mortgage, creating a negligible difference in what you would’ve paid without the increase. Therefore, even though you’re paying a few dollars a month more, you now don’t have to come up with 10k to pay for closing costs all at once. 

There are many benefits to using this strategy for both sellers and buyers, but of course it is situation dependent and the seller needs to be onboard. Good, honest communication and strong negotiation skills may get you there, but the most important thing is having people in your corner that understand these tactics and strategies and can help you get the home of your dreams. Thanks for reading 

*Note: This is for educational purposes only, this is not financial or investment advice.