Concede to Succeed
According to Dictionary.com:
conocede [kuhn-seed] verb, -cedoed, -cedoing. verb (used with object)
1. to acknowledge as true, just, or proper; admit: He finally conceded that she was right.
2. to acknowledge (an opponent’s victory, score, etc.) before it is officially established: to concede an election before all the votes are counted.
There are many times in life that you need to make compromises. You’ll find that you may have to give something to get something. You may have to concede something in order to succeed in something. It is no different in a real-estate transaction. Sometimes a home seller can lose sight of the fact that his goal is to actually sell his home. A seller may think he is losing and the buyer is winning if he makes concessions. It is kind of ingrained in our psyche. I think it started in grade school on the ball field. No one ever likes to concede the game…
But in a business transaction, making concessions is part of the deal making process. And in reality, selling a home is just that; a business transaction. It is not about who is right or wrong or admitting defeat, it is about compromise, and the art of making a deal work. The most common “seller concession” is a contribution toward the buyer’s closing costs. This has been common practice for many years particularly for first time buyers who have good credit but not all of the cash necessary to purchase a home. In an FHA loan, for example, the buyer has to come up with at least a 3.5% down payment but is allowed to get a contribution from the seller of up to 6% of the purchase price to cover closing costs. These costs include items such as the title search, appraisal, tax stamps, etc.
A contribution toward the buyer’s closing costs obviously is really a reduction in what the seller will net on the sale, so it should be looked at with respect to the other terms of the offer. If the buyer has made a low ball offer then he’s not likely to get a concession for closing costs, too. The seller may also feel that he does not want to accept what would be essentially a 6% reduction in his asking price, especially if his home is really (and truly) priced correctly. These days, most sellers realize that they will have to give up something so no deal should be lost over a seller concession for closing costs. Buyers are too hard to come by! If the seller really doesn’t want to contribute all that is requested, he could counter to see if the buyer could come up with part of his closing costs. If the buyer truly needs a seller contribution, all or a portion of that amount can be added on top of the purchase price so that the seller nets an amount that is acceptable to him. The property, of course, will need to appraise at the slightly higher purchase price. The buyer also has to be approved for a loan for that slightly higher amount. This can be a win win for both parties.
After the initial deal is made, other concessions may be asked for to correct defects in the home found as a result of the home inspection process. Many times there are items that arise that the buyer would like to have fixed before the closing or have another seller concession so that he can fix them later. They may, or may not, be big issues to correct. Sometimes they get blown out of proportion by either the buyer or the seller. The buyer should be aware that he might not get all, or any, of the home inspection issues corrected if he has received a large seller concession up front to make the deal happen. The buyer can also opt out of the deal and not purchase the home if the issues are too big to resolve. At that point the seller has another decision to make. He can concede something and succeed in selling his home to the buyer or put his home back on the market and hope to find another buyer. He must remember though, all the defects found in the home inspection have to be disclosed to any future potential buyer. Sometimes making a few concessions can go a long way to getting you where you want to be…
There were 1,399 residential homes for sale in the towns in this Lakes Region report at the start of September, 2010. The average asking price was $521,155 and the median price was $269,000. The inventory level is up compared to last September when there were 1,318 homes on the market. The average price then was $553,314 and the median was $285,000. The current inventory level represents a 22 month supply of homes on the market, oil is about $90.00/barrel, and unemployment is at 9.1%. But, football season is starting. So you see, there are always some bright spots…