Financial Facts: Seller incentives can speed a home sale
If you are considering the sale of your home the first thing you think of is how much money do you want for your home? The price is the single most important thing to most all sellers of real estate. But there is one thing that most sellers never think about, that is how they can make the property more attractive to potential buyers when it comes time for the buyers to finance that home. The easy answer to that question is for the seller to offer incentives for the buyer.
The way I see the process is this, a potential seller contacts a real estate agent and informs them that they are considering selling their home. The agent then compiles a list of home with the same number of bedrooms, bathrooms, square footage and numerous other factors and comes up with a price range that comparable properties have both sold for or are on the market. Then the seller and agent sit down and hash out an asking price. Out of this price the seller will pay for their part of the title insurance cost, closing casts and the real estate agent fee. That is then the sellers bottom line cash in hand amount.
But in today’s real estate market other factors should be considered, especially if the home for sale is competing with many other homes in the same price range. As a lender I suggest that the seller and the real estate agent include in the asking price discussions seller incentives.
Seller incentives can be a simple as a carpet allowance but as sophisticated as an owner carried second mortgage or the seller paying the buyers closing costs. These are items of expense that the seller can build right into the asking price and make their home a bit more attractive to a potential buyer.
Sellers should look at offering incentives to expedite the sale of their home but do so only after they have discussed such incentives with a mortgage professional.
The reason a mortgage professional should be involved right up front is that not all incentives are allowable by mortgage investors. As an example of an incentive that is not acceptable is a snow plow truck as part of the purchase price of the house. The truck can be sold or stolen and is not a part of the actual real estate.
An incentive that is allowable is for the seller to pay part or all of the buyers closing costs. These costs can add up into the thousands of dollars and by having the seller pay for these costs they are essentially rolled into the purchase price of the home.
There are limits on how large of a percentage the seller can pay on behalf of the buyer, plus there are certain ways a mortgage investor wants to see such items shown on the purchase contract. In addition the home itself must appraise for the contract amount or more. So there are things to consider if you decide to offer incentives so make sure you meet with a mortgage professional prior to thinking that all incentives will be agreeable to the investor.
For answers to your mortgage related questions call Bob Kieber are (970) 262-1199 or e-mail him at firstname.lastname@example.org. Bob is a local mortgage lender and principal of Resort Lending. He has 30-plus years of professional experience in real estate, finance and investments.
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