Clearing Up The “Sellers Assist”
A sellers assist is a great financial tool for buyers to save money up front by being able to put less money down at closing for the purchase of their new home. A buyer may have a number of reasons for using the sellers assist; they may be short the cash needed to close or they want to use the funds for improvements to the home or they want to keep the money in the bank because they will get a better return in whatever investment vehicle the money is in. Regardless of the reason we find that during buyer consultations as well as negotiations both buyers & sellers find the concept confusing. I believe it’s because the name is quite misleading.
how does the sellers assist work?
Buyer & seller agree to a purchase price of $200,000 for the home. The buyer wants to add a sellers assist that is 3% of the purchase price. Now the purchase price on the contract is $206,000. At closing the seller receives the agreed upon $200,000 for the home. The $6,000 is credited to the buyer & goes towards the buyers closing costs. While it’s called a sellers assist the seller isn’t actually assisting any further than accepting an inflated purchase price with the understanding that $6,000 is being credited to the buyer at closing. Any funds that the buyer receives in the form of a sellers assist are being added into their loan amount. Therefore the buyer is borrowing that $6,000 from their mortgage company & pays this money back with interest over the life of their loan.
how much of a sellers assist can a buyer receive?
Right now, a buyer who gets an FHA loan can inflate the purchase price by a max of 6%. For conventional loans, a buyer who is putting down less than 10% can inflate the purchase price by a max of 3% & a buyer who puts down 10% or more can inflate the purchase price by a max of 6%. These regulations do change so it is best to speak with your lender for verification.
why do sellers oppose the sellers assist if they aren’t actually assisting?
When an agent first presents an offer with a sellers assist sellers often get upset because they think the buyer is actually asking for money from them. Once the term is clarified & they realize that they are not handing thousands of dollars off to a stranger they often still feel uneasy. There are two major reasons. The first reason is that the seller may question the buyers financial viability because they don’t have the cash to put down on the home. The fear is that the buyer is marginally qualified & will be unable to secure final loan approval. The second reason is the anxiety that the home will not appraise for the inflated amount & the buyer will not have the funds to make up the difference. In both scenarios the seller has taken their home off the market & the deal is going to fall through. A very nerve wracking proposition indeed as anyone who has ever sold a home knows.