Dear Esther –
A friend of mine told me she just sold her home for $205,000 but agreed to a $5,000 seller’s assist. What is a seller’s assist?
Dear Friend –
A seller’s assist is simply money given from the seller to the buyer at settlement to pay for all or part of the closing costs as a way for the seller to assist the buyer in purchasing the home. The amount varies, depending on what the mortgage company allows.
The purpose of a seller’s assist is to make it possible for buyers who don’t have funds to pay for closing costs to purchase a home. In this market with few buyers, sellers are trying to do all they can to encourage interest in their home, hoping to find someone who will buy it. A seller’s assist allows someone to purchase who otherwise would not have the money to do so – usually someone with a good job and credit but little or no savings.
Although this sounds like a good idea, there are drawbacks. Because the sales price of the home (in your friend’s scenario) is $205,000, she will pay transfer tax (1%) and commission (usually 6%) on $205,000, even though, with the seller’s assist, she is only getting $200,000 for her home.
A possible obstacle with a seller’s assist, especially in this market, is the property appraisal. Using the same scenario, even though the seller is really only getting $200,000 for her home, the property must appraise for $205,000 in order for the bank to finance it. With home values down, the home may not appraise for that amount which will kill the deal since the buyers can’t purchase without a mortgage.
If sellers are eager to sell, a seller’s assist may be necessary to get a contract on their home. And it allows buyers, who don’t have the savings, to be able to purchase – a win/win in this difficult market.
If you have questions or need more information, feel free to contact me – Esther Prosser, 484.269.7153, firstname.lastname@example.org.