Seller Concession

Using the Pay Your Mortgage Incentive

A seller concession to pay a buyer's mortgage incentive? First let's look at why and when to use.

You may want to use this strategy in a tough slow market. There are lots of houses for sale in your area and very few buyers.

You first of all, must make sure your house is competitively priced.

This buyer incentive and all the others on these pages, assumes that you price your house correctly.

The idea of a seller concession is to add more value for a buyer.

In other words, you are priced the same as the competition, but you have

the extra carrot.

This offer will be most attractive to:

• First time buyers.
• Cash poor buyers.

Please first read My Disclaimer and then check with either a real estate lawyer, mortgage lender, or a mortgage broker to make sure that you can offer this incentive legally in your area.

You must also keep in mind that a seller concession should always be disclosed in the purchase and sales agreement.

As a for sale by owner, you should always have blank for sale by owner contracts on hand.

To save you time, I have provided a link below, for the best places I personally know of, to obtain these forms.

Just go to: For Sale by Owner Contract Forms

What you want to do, is every place you advertise whether it be on the internet, newspaper, yard and directional signs or flyers that you are offering to pay a buyer's mortgage payments for x amount of months.

For Internet coverage to advertise your pay a buyer's mortgage seller concession, follow this link; For Sale by Owner Websites.

You may also want to place a "some conditions apply" or words to that affect on each advert.

Now, here comes the important part. Unless it is legal where you live to give the buyer cash back for the mortgage payments, you should always make these adjustments through your real estate lawyer in escrow, or at closing. Giving a buyer actual cash back from you to them, in most cases will be illegal.

So, talk to your lawyer and/or lending folk to make sure you cross all the t's and dot all the i's.

That depends on you and the cost involved. The most common offers will 3 or 6 months payments.

Let's look at the cost to you using a couple different examples.

If the mortgage is $200,000.00 with an interest rate of 5% amortized over 25 years, that would cost you:

Approximately $1,170.00 per payment P & I (Principal and Interest).

Therefore, 3 months would costs you approximately $3,510.00.

6 months would costs you approximately $7,020.00.

The reason I didn't use exact figures, is mortgages are calculated slightly differently in some places. As an example, loan payments in Canada are slightly higher than in the U.S.A. for the same amount borrowed, with the same terms.

Of course in other countries, you might be calculating in Pounds Sterling, in Rubles, or perhaps Euros.

You have to protect yourself. Here are a couple conditions you might want to include in your offer:

• The mortgage payments are to include principal and interest only. (Not to include property tax)
• The amount of monthly payments, not to exceed xxx amount of $$$ per month or xxx amount of $$$ in total. Any excess over said amount, to be paid by the purchaser.

As long as this seller concession is legal in your area and it is fully disclosed to all parties, it may just make a difference in your house selling or not.

This seller concession will cost you real money. However, it might be better to take a $3,500.00 shortfall than to not sell at all.

If your neighbor was on for the same price as your house without the seller concession and they sit on the market for 6 more months, in the long run they would probably drop their price far further, than what you ended out netting with the extra buyer incentive.

Just a reminder, all these seller concessions are usually offered, when the market is soft and it's hard to sell a house.

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