Question on Seller's Concession

[gkis]

I am in the process of buying a single family home (250000), closing socts ~ 15000. I'm in NY. My mortgage broker suggested we include the colsing costs in the mortgage. The appraisel was yesterday , still waiting for it. The mortgage broker said, after the appraisel, he'll talk to my lawyer to make a chnage in the contract, so the purchase price reflects 265000 and seller's concession. My questions are:
1. How common is that? To make ammendments after signed contracts with seller's concession.
2. What are the reasons for the sellers to refuse and how can I negotiate?
3. What other options do I have to finance the closing costs?

Thank you in advance for the time!

[TJ2007]

Well it is quite normal for the closing costs to be rolled in like that, however it is normally done in the initial offer/ contract.

The down side of trying to negotiate it at this stage in the game is that the seller may now think his property is worth more money and prefer to try and sell it at the higher price so he nets the extra 15k or so himself.

If he really wants to sell and sell now, then he should be fine with it, however the higher price will cost him extra in taxes, it is normal for you to cover the extra cost for the difference in taxes.

Failing this you may be able to get a personal unsecured loan to cover the closing costs.

[Thesa]

I was under the impression from my own real estate transactions and those of my clients that taxes are only paid on the actual amount gained - if it is a seller conssession the closing statement show the increased sales price but it will also show it was paid out.

Another thought to consider is this their main residence - tax issues are completely different with that than say a second home or investment property.

We do not use attorneys for closing so what works here may not work there.

[TJ2007]

Good Point, actually I was referring to seller doc stamps that are based on sales price not income taxes, sorry...

But yes may be different for every state.

And yes Thesa is right about income tax/ CGT on the Net proceeds

[gkis]

Thank you both for your answers.

Acctually my mortgage broker offered that, I did not know it could be done at the time of offer. However, he wants to wait for the appraisel to come through and if it's ok, we'll ask the sellers. Of course I'm willing to cover the difference in their taxes. It is not their primary residence, but their father's who's very sick. I guess they got it from him a few years ago. The house was on the market for 265000, we offered 250000 and they accepted, it is in great need of updating and repairing, but we agreed on AS IS, beacause there's a lot of land, and wanted the sale to be quick and smooth. After the broker offered seller's concession, I just wanted to use the 15000 , it would help a lot. So I hope they will be flexible...

[OregonLO]

well, my first question is why are your closing cost $15k on a $250k purchase. I know it is another state but that just seems a tad high to me. $250k purchases are pretty normal in Oregon and the closing costs never really exceed $9,000 but I guess it is New York ;-)

I'm a Mortgage Loan Officer and we tend to roll your closing costs into the loan like he is doing but as stated earlier we tend to have you negotiate that into your original offer. Not after you get it accepted. I had a deal fall apart because the buyer wasn't using an agent and trying to by a "For sale by owner" He didn't negotiate things correctly and didn't get the seller to pay closing costs. He didn't have the money and the deal fell apart AFTER an appraisal was already done. He was out $400 for the appraisal and no house to buy.

[gkis]

I did not know about this possibility. My mortgage broker offered after signed contracts. I do have the money for the closing costs, so it's not an issue. I just wanted to try to roll them in if it's possible, if not..I'll pay...

[REbuyersgroup]

Great post for newbies.

Always get the deal negotiated in the beginning! You can also negotiate a percentage of the price instead of $ amount.

Since it is on the HUD as a concession, there should be no tax liabilities on the seller.

I have also seen cash out of closing deals. Be careful. if the price of the property is increased in order to provide an off balance sheet payment it could be considered bank fraud.

You can also put in the addendum that contract is contingent on appraisal at a specific price. If the appraisal is lower the contract can be canceled by either party or re-negotiated.

Good luck on your deal.

Your Attorney "should" be offering you advise. I know in NY that closings also have a clause that the closing is "on or about" in most other states it is "On or before". My brother sold his house in NY and had a closing date in 45 days, yet he did not actually close for another 30 days because of that stupid clause. NUTS...

NY RE attorneys really gum up the process.

Good luck with your contract and purchase!

-Craig