The #1 hack in a falling Real Estate market, for both Buyers *and* Sellers, when a loan is involved?
Seller Credits. They're the ultimate “freebie” for both sides to exploit – but you may need to act quickly. Here's why, and how:
Seller Credits are taken out of the Seller’s proceeds at closing and can be used to benefit Buyers reliant on a mortgage. Smart sellers (and their agents) know: giving a Buyer “more” up front can actually *make* you money.
Buyers using loans are currently facing volatile interest rates - if rates on a $750K mortgage move from 4% to 6% (for example), that same buyer may pay over $900/month *more* for the exact same house.
What’s worse, whether those rates go up or down, Buyers are still stuck paying $5K, $10K, $20K (or more) at closing for loan origination and other costs.
When loan costs skyrocket and would-be Buyers suddenly disappear, Sellers can be left crying into their morning cereal. But smart Sellers (and Buyers) can use Seller credits to close the gap with a high-five.
Depending on the size of the down payment, Sellers can provide anywhere from 3-6% from their side of a sale to Buyers to use for things like closing costs (remember that $20K?) or even to help “buy down” a Buyer’s interest rate to something more manageable.
But won’t Sellers *lose* money? Not necessarily. For many Buyers, having an extra $20K in the bank at closing is more valuable than say, an extra $120 per month in mortgage expenses. But to pull it off, both sides need to act quickly.
Buyers and Sellers can (at the moment) pull a fast one of sorts, inflating the purchase price by an amount equal to the credits the Buyer is seeking. Buyers get their credits, and Sellers don’t get fleeced. That is, *if* the appraisal goes well.
Most loans require the Buyer to pay for an appraisal (unless you pay for it out of… Seller credits!). Anyway, that appraisal value must meet the (slightly inflated) Purchase price, or a lender will often decline to back the transaction.
Thanks to a backlog of epic sales prices pre-market correction, Appraisers in many places still have plenty of frothy data to point to that can justify both sides “juicing” their sales price a tad. But like all good things, this may not last.
If prices continue to slide, elevated numbers will be increasingly difficult for appraisers to justify, and Sellers may have to join their peers in chasing would-be Buyers down the market correction rabbit hole.
That possible slide could end up benefitting Buyers in the long run, unless it reverses course, wherein they’d be right back where they started, hunting for houses in a high-priced market with scant supply.
Buyers can choose for themselves whether to roll those dice, but in the very short term, Seller credits are a nifty way to get Buyers housing, with “high fives” for all involved.
As always, please check with your local Real Estate agent or lender for advice, options, and guidelines.
