Thursday, May 15, 2008

Price Reduction vs. Seller Credit

When buyers decide that they want to make an offer to purchase a property, often their fist instict is to offer less than asking price. This stems from a desire to save money, which we all want to do, and can perfectly understand. There is a problem with this approach though. In market where a property will see multiple offers (yes, even now, we are seeing many properties that are in a bidding war), you as a buyer stand a chance to loose out in the end. There are hundreds of ways to save money with real estate and during a consultation with us, we'll show you each and every way!

Here we present a scenario, in which the buyer saves a significant amount of money, without the hassle of having to justify a "low-ball" offer, or risk offending the seller (which is even worse).

Scenario #1 (traditional sale)
Scenario #2 ($20,000 'low-ball')
Scenario #3 (seller credit, 20k)
Sales Price
20% Down Payment
Loan Amount
30 Year Fixed Rate
Savings of

As we can see, asking the seller to credit some money (at closing) toward buying down the interest rate, we have a greater savings over just asking for a discount on the purchase price. An additional benefit to this method is, a buyer who barely qualifies, or doesn't qualify at all, using the traditional, or discounted numbers, now qualifies with the seller credit because, the payment is less of a burden on Mr. Buyer's income ratio.

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