If you were to receive a postcard in the mail from Macy’s telling you about a 50% off sale, you might be intrigued to go to the store and look around.  On the other hand, if you had received a postcard for a 2% off sale, it probably wouldn’t have motivated you at all. 

If you have a $250,000 listing that the seller is going to reduce it by $5,000, it is a 2% reduction.  It probably won’t motivate anyone to look at it for $245,000 that wouldn’t have looked at it at $250,000.  The reduction from a practical standpoint will not generate any new traffic for the listing.

However, let propose a different strategy.   Instead of reducing the price by $5,000, apply the $5,000 toward financing concessions to be deemed as the by wants.  They can be applied toward the buyer’s closing costs, prepaid items, or a buy down of the interest rate.

The financing concessions may be much more attractive to a buyer than the $27 lower payment on a 5% 30 year loan.  If it were applied toward a 2/1 buy down, the payment would be almost $278 cheaper the first year and $143 cheaper the second year.  If you could get the seller to agree to $10,000 in financing concessions, they could be applied to a 2/1 buy down and the balance toward the buyer’s closing costs.

The financing concessions represent terms that are as important marketing factors that affect the sale of a home as the price.  In many instances, the buyer is using all of the available cash for down payment and possibly closing costs and will not have any discretionary funds to make changes in the home after they move in.  The terms give them an alternative which can be very desirable.

Different types of loans have different limits for the maximum amount of financing concessions paid by a seller for the benefit of the buyer.  FHA allows the most at 6% of the sales price; VA allows 4% and Conventional allows 3%.

Financing concessions and many other finance strategies are taught in the Discovering the Finance Difference course.  Click here for more Details & Demo  or Sponsor a Course