How Much Seller Assist Can I Ask For?

Seller assist, also known as seller concessions or seller credit, is a financial arrangement where the individual selling a property agrees to cover a portion of the buyer’s closing costs. This practice can significantly lower the amount of upfront cash a buyer needs to finalize a home purchase. It serves as a tool to make homeownership more accessible by reducing immediate out-of-pocket expenses.

What Seller Assist Covers

Seller assist funds are typically applied to various eligible closing costs and prepaid expenses associated with a home purchase. These can include loan origination fees charged by the lender, appraisal fees, and title insurance premiums that protect both the buyer and the lender. Other common expenses covered are recording fees, which are governmental charges for officially documenting the property transfer, and property taxes or homeowner’s insurance premiums that are prepaid for a certain period. Seller assist can also be used for discount points, which allow a buyer to permanently lower their interest rate. These funds cannot be used to cover the buyer’s down payment.

Maximum Allowable Limits

The maximum amount of seller assist a buyer can request is not uniform and is strictly regulated by the specific type of loan obtained. The cap is generally based on a percentage of the lesser of the home’s sales price or its appraised value.

For conventional loans, the limit on seller contributions varies based on the Loan-to-Value (LTV) ratio and the property’s use. If the buyer’s down payment is less than 10% (LTV above 90%), the seller can contribute up to 3% of the sales price. For down payments between 10% and 25% (LTV between 75.01% and 90%), the limit increases to 6%. When a buyer puts down more than 25% (LTV up to 75%), sellers may contribute up to 9%. For investment properties, the seller assist limit is typically capped at 2% of the sales price, regardless of the down payment amount.

Federal Housing Administration (FHA) loans allow sellers to contribute up to 6% of the lesser of the sales price or the appraised value toward the buyer’s closing costs, prepaid expenses, and discount points. Any seller contributions exceeding this 6% limit will result in a dollar-for-dollar reduction in the loan amount.

For Department of Veterans Affairs (VA) loans, the rules differentiate between standard closing costs and specific concessions. Sellers can pay for all customary closing costs without these counting towards a limit. However, for other “concessions,” such as payments toward the VA funding fee, prepayment of property taxes and insurance, or paying off buyer debts, the limit is 4% of the loan amount or sales price.

United States Department of Agriculture (USDA) loans typically permit seller contributions up to 6% of the home’s purchase price. If the seller’s contribution exceeds the buyer’s total closing costs, the excess amount may be applied as a reduction to the loan principal.

Impact on Loan and Appraisal

Requesting seller assist can influence both the loan amount and the appraisal process. While seller assist helps reduce the cash a buyer needs at closing, the loan amount is generally based on the gross sales price of the home. The property must appraise for at least this gross sales price for the loan to proceed as planned.

Lenders analyze the overall transaction, including the net sales price, which is the gross price minus any seller contributions. If the amount of seller assist is excessively high, it might raise concerns for the lender or appraiser about the property’s true market value. Appraisers are required to identify and report sales concessions, and they may adjust comparable sales to account for these concessions if they believe the sales price was inflated to accommodate the assist. Such adjustments could potentially affect the appraised value, impacting the loan approval or terms.

Negotiating Seller Assist

The request for seller assist is typically integrated into the buyer’s initial purchase offer for the home. Buyers often adjust their offer price to incorporate the desired seller assist. For instance, a buyer might offer a slightly higher purchase price to allow the seller to effectively “give back” a portion for closing costs, ensuring the seller still receives their desired net amount.

The willingness of a seller to grant assistance is often influenced by current market conditions. In a market favoring buyers, sellers may be more inclined to offer concessions to attract offers and facilitate a faster sale. Conversely, in a competitive seller’s market, buyers might find it more challenging to negotiate significant seller assist. Ultimately, seller assist is a negotiation point between the buyer and seller, outlined in the purchase agreement.