Seller Assist, what is it and why do I care?

The Seller Assist is actually quite common in my market (Wilkes-Barre, PA) but is something that everyone isn't familiar with. If you are buying or selling a home, it's important to know what it is, how it's used and how it affects you as a buyer or seller.

A Seller Assist is really just a way for the Buyer to get some help with paying their closing costs. This is money that the buyer borrows from the bank to buy a property and is given back to the buyer by the seller in the form of a credit on the closing statement to help pay the buyer's closing costs. This is how it works:

A buyer goes to a financial institution and get's pre-qualified for a loan. The institution then tells the buyer the type of loan they are qualified for and the conditions under which they can get a loan. They will note whether a seller assist is applicable and how much can be used.

Armed with this information, the buyer goes to look for homes that are in their price range. For this example, let's say the buyer finds a home that they want to offer $150,000 for. They have been approved for a loan in the amount, with the capability to include a 6% Seller Assist (by the way, 6% is the max allowed in most loans). The buyer's agent will write an offer for around $159,000 (I'm using round numbers here to make the example easier. The actual numbers are a bit different), and ask that the seller give $9000 back to the buyer to help with the buyer's closing costs.

If this offer is accepted, the buyer will apply to the bank for a loan for up to $159,000 (depending on down payment) in order to pay for the house. The house will have to appraise at the $159,000 price in order for this scenario to work. The bank will then pay the seller $159,000 for the house and the seller will pay $9000 back to the buyer at closing.

How does this affect everyone involved?

The Sellerget's the net amount of the offer price minus the seller assist. This is the price the seller must be happy with. Sometimes, agreeing to a Seller Assist will enable a buyer who couldn't otherwise purchase the house to do so. The seller should also pay their commission on the net price, not the inflated seller assist price. Some agents do it otherwise, but it's only fair to pay it on the net price.

The Buyer is able to get some help with paying their closing costs. This doesn't necessarily mean that the buyer doesn't have the cash. It could mean that they want to use the money they have for other things, like doing updates, putting in a pool or just keeping it in the bank for emergencies. The buyer will be taking out a larger mortgage than otherwise, since they are borrowing this money from the bank with the mortgage.

The Realtors involved are able to help their clients get what they want from the deal, which equates to a closed sale and a commission earned. It's important to understand that the house will need to appraise for the total amount of the offer. A qualified professional should be able to know when this will be possible and when it won't. Their guidance in this process can be invaluable.

Seller Assists aren't available with all loans. It's important to know this information before the home search begins. A mortgage professional will help you to understand the options available to you. It's also important to have a Realtor who is knowledgeable as well, as they will be the one writing your offer and presenting it to the other side of the transaction.

If you are interested in finding out more info about this subject and are buying or selling a home in the Wilkes-Barre, PA area, give me a call or go to my website at www.wilkesbarrehomesales.com.

Until next time...