Seller Pays Closing Costs: Benefits & Drawbacks

 

One strategy that can make a big difference for buyers is encouraging sellers to pay closing costs.

By educating sellers on the benefits, you can help them attract more potential buyers and stand out.

When sellers cover these expenses, it reduces the financial load on buyers upfront, making homeownership more accessible and appealing.

  • But should they?

  • And can you even get concessions nowadays?

  • What do you even say to your seller clients when this topic comes up?

In this article, I'll explore the pros and cons of seller-paid closing costs with you.

We'll go over expert insights and proven tactics to effectively communicate the advantages to your sellers and negotiate successful deals.

By mastering this technique, you'll demonstrate your knowledge and resourcefulness as a real estate agent, building trust and setting yourself apart.

Get ready to empower your clients and take your career to new heights.

Discover how steering sellers to pay can be a game-changer in turning homeownership dreams into reality for buyers.

The key is educating yourself on the benefits and drawbacks, so you can have informed conversations with both buyers and sellers.

This knowledge and guidance is what sets great real estate agents apart.

Top Takeaway:

In some cases, sellers may agree to pay for closing costs as part of the negotiation process. However, it ultimately depends on the terms of the agreement between buyer and seller. It's crucial to discuss this with your clients as their real estate agent.
 

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Chapter 1: How Common are Seller Concessions?

When it comes to figuring out whether a seller will offer concessions, there's no one-size-fits-all answer.

Instead, it really depends on what's going on in the local housing market and the unique situation of each real estate deal.

Looking at nationwide statistics, around 45% of sellers provided some kind of concession to buyers in early 2023.

But those broad numbers don't tell the whole story. In reality, how often sellers make concessions fluctuates a lot depending on the region and even neighborhood you're talking about.

For example, in super competitive housing markets - like we've seen in many major cities in recent years - concessions are less likely.

When demand outpaces supply, sellers feel empowered in negotiations and typically don't need to sweeten the deal much to attract strong offers. It's a seller's market, after all.

As real estate professionals, your job is to equip our clients with the clearest possible understanding of norms and expectations around concessions in their specific area and price range.

You need to put market analytics and sales data to work demonstrating how concessions have impacted other comparable home sales.

This context sheds light on the potential strategic upsides and downsides of concessions, empowering sellers to align on an approach that matches their goals.

Seller Concessions in the 2024 Housing Market

In 2024, the housing market will be shaped by a mixture of factors, each swaying the likelihood and impact of sellers helping out buyers with closing costs.

  • Mortgage rates should settle around 6.6% by year's end.

  • But affordability issues continue, with home prices still steep in many areas.

  • Facing this landscape, eager sellers looking to stand out may see covering closing costs as a strategic play.

It's true that by easing the upfront money burden for buyers, especially first-timers or those light on savings, sellers can make their homes more enticing.

However, you need to coach your seller clients to approach concessions informed on the trade-offs.

While paying closing costs can speed up sales, it may also drag down the final price.

Savvy buyers could factor the perk into their offer, potentially netting sellers less profit.

Chapter 2: An Emotional Rollercoaster

Make no mistake - the concession debate can spark an emotional whirlwind for both buyers and sellers. Deftly navigating these choppy waters with empathy and care is the hallmark of any realtor worth their salt.

The Seller's Perspective

Needless to say, emotions often run high for sellers.

The idea of offering concessions, where they cover certain expenses for buyers, can stir up a complex blend of feelings.

On one hand, there's a glimmer of hope - concessions can attract more prospective buyers and speed up the sale process.

Just think of your listing standing out in a sea of options!

However, this optimism is often tempered by hesitation over parting with funds originally earmarked for their next house or future plans.

The notion of "giving away" money can be unsettling.

Sellers may also experience frustration, even a tinge of resentment.

Why should they bear this financial burden, especially after investing so much into prepping their property?

They might question a buyer's commitment if concessions are demanded.

As a skilled real estate agent, you play a crucial role in validating these emotions while gently guiding sellers toward objectivity.

Remind them that concessions are a standard negotiating tool that can work in their favor by attracting serious buyers hungry for a deal.

Share data demonstrating how concessions have facilitated sales in your area.

By arming sellers with knowledge and context, you empower them to make informed decisions aligned with their goals, not just passing fears.

The Buyer's Lens

For buyers, the prospect of sellers covering certain costs like appraisals or loan processing fees can spark immense relief.

The upfront expenses of buying a home quickly accumulate and strain budgets.

A concession commits the seller to alleviating some of this strain - an enticing proposition.

However, apprehension may creep in too.

Buyers could see a willingness to offer concessions as a red flag about the home's condition or the seller's desperation to offload the property quickly.

They might feel uneasy about appearing greedy or derailing the deal over concession requests.

Here, you can provide objective guidance and reassurance.

Explain that reasonable concession requests are negotiation norms, not faux pas.

Share examples of win-win scenarios enabled by concessions.

Encourage buyers to focus on the property's overall value and affordability rather than emotional dynamics.

A balanced perspective addressing concerns builds buyer confidence in pursuing this path strategically.

 

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Chapter 3: Navigating the Delicate Dance

Maneuvering concession negotiations requires finesse and expertise.

As the real estate agent, you must safeguard your seller's interests while keeping the deal appealing to buyers.

Begin by carefully assessing the current market landscape and your seller's unique position:

  1. In a buyer's market, concessions can be a lucrative tactic for making your listing ultra-competitive.

  2. For sellers keen to offload their property swiftly due to relocation or finances, concessions accelerate the process by capturing more buyer interest.

  3. If your seller prioritizes profit over speed, holding firm on asking price while the buyer handles expenses may be preferable.

Justify your strategic recommendation using concrete data - break down cost projections, highlight similar homes that landed quick wins via concessions, demonstrate tangible benefits and tradeoffs.

Visuals reinforce your case.

Throughout negotiations, keep communication open and sellers looped in on developments.

Promptly address any concerns as their priorities evolve.

If counteroffers stall progress, brainstorm creative compromises like a home warranty credit or funds for renovations.

With in-depth market intelligence, creative problem-solving, and a commitment to transparency, you'll expertly pilot sellers through even the murkiest concession negotiations.

Chapter 4: Accounting for the Appraisal Factor

One potential concession pitfall?

Its impact on the appraisal process.

When sellers cover expenses, the purchase price is typically inflated to offset these costs.

But if the appraisal comes in lower than this adjusted price, mortgage lenders could demand the buyer bridges the gap with cash, renegotiate, or walk away entirely.

Stay ahead of this curveball by proactively involving appraisers early on.

Before settling concession terms, advise sellers to consult a seasoned local appraiser for an objective home valuation estimate.

This prep work prevents nasty surprises later.

If the appraisal does fall short, be ready to pivot - suggest scaling back concession amounts, find other incentives like repair credits or home warranties, or counsel a price reduction.

Maintaining transparency with all stakeholders is key as you collaboratively navigate solutions.

By anticipating and directly addressing the appraisal conundrum upfront, you position your sellers for concession success.

Chapter 5: The Balancing Act of Strategic Concessions

Ultimately, offering concessions requires carefully weighing the potential upsides against the inherent risks given each client's unique circumstances.

On the upside, concessions are a powerful tool for enticing buyers and accelerating sales velocity.

By lessening upfront costs, you unlock your sellers' property to a wider pool of qualified buyers.

Deals materialize faster.

However, the challenges can't be ignored - a lower net profit, risk of a bungled appraisal derailing financing, complexity in negotiating fair terms.

Your clients need full transparency into this delicate tradeoff.

There's no universal formula - the ideal concession strategy varies based on your seller's priorities, the property itself, and local market forces.

Take the time to truly understand their goals, motivations and pain points.

This holistic view informs a custom plan that protects their interests while remaining competitive.

Leverage your expertise to advise on the ideal approach, whether that means confidently extending or declining concessions.

Provide data-backed insights, credible market context, and strategic guidance throughout.

With your skilled support and counsel, sellers can confidently navigate the concession balancing act in a way that maximizes their chances of a smooth, successful transaction.

That's the hallmark of a top-tier real estate agent.

 

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Chapter 6: The Art of the Concession Conversation

While the strategy behind concession guidance is paramount, how you engage in those conversations is equally vital.

It's an art of nuance, emotional intelligence, and finely-tuned communication skills.

Let's start with your initial consult exploring a client's concession stance.

  • Rather than dry interrogation, craft an inviting narrative where you compassionately unearth their motivations, pain points and deeper aspirations around the transaction.

"I'm curious, what hopes and dreams fuel your home sale goals? Understanding those drives how I strategize for your best outcome."

  • Frame inquiries conversationally, allowing space for clients to open up.

  • Actively listen to their verbal and non-verbal cues, reflecting insightful points.

  • This establishes an emotionally safe space built on mutual trust and understanding from day one.

  • When ultimately advising on concessions as part of the strategy, stick to an educator's mindset over a detached pitch.

  • Use relevant examples and case studies to vividly illustrate concepts in a story-based format.

  • Spike the discussion liberally with upbeat metaphors and analogies to ignite engagement.

"Offering concessions is like having dynamite fishing lures in your tackle box. They won't hook every fish, but damn if they don't attract some whoppers when conditions are right!"

  • Tone remains consultative yet accessible, meeting clients in their vocabulary universe.

  • Simplify complex scenarios with apt comparisons.

  • Use precise, evocative diction to plant mental imagery.

Throughout, remind clients you're partners paddling together toward their real estate triumph.

Concerns, fears, elations - you navigate those currents as a devoted guide, not a unilateral "expert."

This humble approach nurtures an environment of psychological safety.

Mastering the Finer Touches

While grand strategy and delivery technique mold the concession conversation's core, subtle grace notes polish the experience to true realty artisanship.

It's your final varnish of authority and authenticity that solidifies trust.

Pay close attention to the rhythm and cadence you cultivate.

  • Vary sentence lengths and patterns to avoid monotonous lullabies.

  • Punch up urgency where impactful through precisely deployed repetitions and rhetorical pauses.

"This...is...a limited....window. Striking...swiftly...is pivotal."

  • Embrace the powerful pause occasionally to dare the silence, allowing weight to settle before continuing.

  • Match your vocal dynamism to the narrative's evolving energy.

  • Capitalize on opportunities to demonstrate hyper-attunement to client specifics.

  • Tactfully reflect their revealed motivations, realigning advice to those intrinsic drivers.

  • Speckle in colloquialisms and wit tailored to their communication style.

"So for empty-nesters like yourselves looking to downsize into that cozy forever home, prioritizing costs over speed could maximize your fun funds for that round-the-world adventure you've dreamed about."

  • These finely-tuned touches convey you're laser-focused on them as individuals, not reciting scripts.

  • They validate you've absorbed every nuance fueling their goals.

  • Finally, lend an occasional dash of metaphor or imagery to elevate points.

  • Used judiciously, these mental pictures forge stickier comprehension while hinting at your creativity reservoirs.

"Negotiating concessions is like traipsing through a philosophical meadow. Without a trailhead mindset, you may wander aimlessly, missing the lush overlooks."

 

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Chapter 7: Adapting on the Fly

Even the most meticulously crafted concession strategy can encounter unexpected turbulence once negotiations kickoff.

Mastering this dance requires radical adaptability anchored in deep market expertise.

Let's say the initial offer involving seller concessions comes in far below expectations.

Rather than reacting dismissively, pause to realign perspectives through an insightful facilitated discussion.

"I appreciate this opening salvo put concessions firmly in play. However, the total value proposition feels disconnected from where the recent comparable sales are indicating things should land. Why don't we walk through those data points together as a recalibration? I'm confident we can locate an equitable concession zone that works for everyone."

By numbing any confrontation sparks with deft reframing, you restore a collaborative mindset.

Visually mapping the market intelligence allows mutual problem-solving versus adversarial bartering.

Your role transcends guided representation into being an impartial sense-maker.

Or perhaps the appraisal delivers a curve-ball finding significantly below the projected purchase price inflated by concessions.

Here, you urgently facilitate a candid discussion unpacking the findings, impacts to all parties, and a realistic reassessment of the deal's viability.

Avoid accusations - concentrate on mutually parsing the data and identifying potential pivots or alternates like:

  1. Renegotiating concession amounts to realign with appraised value

  2. Restructuring the transaction with seller credits for renovations/repairs

  3. Exploring a path for buyer increases to down payment or seeking a new lender

  4. In worst cases, an amicable unraveling may be the only viable solution

Throughout any turbulence, you must exude poise and confidence borne from experience successfully navigating similar scenarios.

Decisiveness tempered with empathy and creativity are paramount.

Form follows function.

The human elements are paramount when turbulence inevitably emerges during concession dealings.

Adapt adroitly through facilitated problem-solving rooted in expertise and emotional intelligence.

Chapter 8: Becoming the Preeminent Concession Consigliere

Guiding buyers and sellers through the strategy, emotions and nuances of concession proposals is a towering aspect of your role as their real estate consigliere.

With dedication to continuous study and client-craft mastery, you elevate this skill into a powerful marketplace differentiator.

Beyond closings, make concession discussions a centerpiece of your personal brand voice across all channels - blog posts, recorded video seminars, LinkedIn posts.

Routinely spotlight successful case studies illustrating your expertise facilitating concession wins.

Share before/after data visualizing smart concession impacts.

Establish your thought leadership through a prolific stream of authoritative, engaging content.

When networking or presenting listing proposals, organically weave compelling concession narratives about your consulting prowess into the conversation.

Seed curiosity and respect through vivid anecdotes and metaphors.

"You know, navigating a concession negotiation is like artfully charting a corn maze - without a knowledgeable scout, you'll likely wander in circles until exhaustion."

Foster evergreen dialogue around concession trending and emerging strategies.

Host roundtables, attend industry events and consistently raise your hand to spearhead seminars or panels.

Display humble curiosity blended with hard-earned wisdom during discourse.

Colleagues and prospects alike will increasingly view you as THE community's preeminent concession authority.

Final Thoughts

Here's a breakdown of all the pros and cons of sellers paying the closing costs:

Pros

  • Attracts more buyers

  • Speeds up the sale process

  • Helps buyers afford the home

  • Can be a strategic negotiation tool

Cons

  • May result in a lower sale price

  • Appraisal risks

  • Complexity in negotiations

  • May not be necessary in a seller’s market

Ultimately, becoming a true concession master is equal parts deliberate craft refinement and reputational reinforcement.

Immerse yourself fully into both - dial in your consulting skills through relentless study and seamless delivery while amplifying that excellence consistently in your branding.

Undivided commitment to maximizing this expertise stream establishes a durable competitive advantage.

Your unique, authoritative voice for artfully navigating the concession continuum will increasingly drown out newbie real estate agent static.

Buyers and sellers will choose that stature premium every time for representation on this complex aspect of their biggest financial decision.

Become THE ambassador that demystifies concessions for your community.

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Ylopo's AI-powered platform is the key to unlocking your full potential.

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About the Author

Aaron “Kiwi” Franklin

Head of Growth