Welcome Back to the Seller Concession Playbook

Jennifer Chicano, Your Loan Chic, is back with another episode of the Seller Concession Playbook to address a strategy that confuses a lot of buyers when they first hear it. Offering above the list price in exchange for seller concessions. Done correctly it can create a real advantage. Done incorrectly it creates problems. Understanding the difference is the entire point of this conversation.

What the Strategy Actually Looks Like

Take a home priced at five hundred thousand dollars. Instead of offering five hundred thousand with no concessions a buyer might offer a higher purchase price and ask the seller to contribute toward allowable closing costs or a rate buydown strategy as part of the deal.

The seller receives a net amount that may still meet or exceed what they were looking for. The buyer gains access to funds that can reduce their cash to close, lower their monthly payment through a buydown, or accomplish both depending on how the concession is structured.

On the surface both parties can come out ahead compared to a straightforward full-price offer with no concessions.

The Important Catch That Changes Everything

The strategy only works when two conditions are met and both are non-negotiable.

The home has to support the higher value. That means the appraisal has to come in at or above the higher purchase price. If the home is offered at five hundred and thirty thousand dollars and the appraiser determines the property is worth five hundred thousand the financing is based on the appraised value not the contract price and the numbers no longer work the way the strategy intended.

The numbers have to make sense for the financing. Lenders have limits on how much a seller can contribute toward closing costs based on the loan program and the loan-to-value ratio. A concession that exceeds those limits cannot be used toward allowable costs and does not produce the intended advantage.

What This Strategy Is Not

Jennifer is clear about the distinction. This is not about artificially inflating the purchase price to manufacture a concession. That approach creates appraisal risk and financing problems and it is not what the Seller Concession Playbook is built around.

This is about looking at the entire transaction and determining whether structuring the offer with a higher price and a seller contribution creates a genuine advantage for the buyer without creating complications for the financing or the appraisal.

The principle that runs through every episode of this series applies here as well. Do not just negotiate the price. Have a plan for the money.

Follow along for the next episode of the Seller Concession Playbook and reach out to Jennifer Chicano, Your Loan Chic, to build the right strategy for your specific purchase.

Sources

ConsumerFinancialProtectionBureau.gov
FannieMae.com
MortgageNewsDaily.com
HUD.gov
Investopedia.com