How Seller Assist Works for Buyers and Sellers

Seller assist, also known as seller concessions or seller contributions, is a common practice in real estate transactions. This arrangement involves the seller agreeing to pay a portion of the buyer’s expenses, typically at closing. It helps make homeownership more accessible for buyers by reducing the upfront cash they need, facilitating the property sale.

Understanding Seller Assist

Seller assist defines an amount of money a seller agrees to allocate toward a buyer’s costs as part of the home purchase. Sellers often offer these concessions to make their property more appealing, especially in competitive or slower housing markets. It can also help ensure a deal closes, particularly if a buyer has limited upfront cash for closing expenses.

While the seller provides this payment, the amount is usually factored into the agreed-upon sales price, meaning the buyer often finances the concession through a slightly higher loan amount. Seller assist is a negotiable element in the purchase agreement.

What Seller Assist Can Cover

Seller assist covers various costs on the buyer’s side of a real estate transaction. These often include closing costs, such as loan origination fees, appraisal fees, title insurance premiums, attorney fees, and recording fees.

Beyond these, seller assist can also cover prepaid expenses, such as prorated property taxes and homeowners insurance premiums. Additionally, it can be used for specific loan-related fees like discount points, which are paid to the lender to reduce the buyer’s mortgage interest rate. Seller assist cannot be used for the buyer’s down payment.

Negotiating and Applying Seller Assist

Negotiating seller assist begins during the offer phase. A buyer might request a specific dollar amount or a percentage of the sales price, or a seller might proactively offer it to attract buyers. Once agreed upon, the seller assist amount is included in the purchase agreement. The agreed-upon amount is then applied at closing, directly reducing the buyer’s out-of-pocket expenses.

Regulations on seller assist vary depending on the type of loan the buyer secures. For conventional loans, the maximum seller contribution depends on the buyer’s down payment: 3% for down payments less than 10%, 6% for down payments between 10% and 25%, and 9% for down payments greater than 25%.

For FHA loans, the seller can contribute up to 6% of the sales price towards closing costs, prepaid expenses, and discount points. VA loans have a limit of 4% of the home’s purchase price for seller concessions, which can include items like the VA funding fee and payment of the buyer’s debts, in addition to customary closing costs. These limits are based on the lesser of the sales price or the appraised value.

Impact on the Transaction

Seller assist impacts the financial dynamics for both buyers and sellers. For buyers, it reduces the immediate cash needed at closing, making homeownership more attainable. While it reduces upfront costs, the amount of seller assist is often incorporated into a higher sales price. This results in a slightly higher loan amount and potentially a higher monthly mortgage payment.

For sellers, offering an assist can accelerate the sale of their property by attracting more buyers. It can also help finalize a deal that might otherwise fall through due to the buyer’s inability to cover all closing expenses. Although the seller contributes financially, this is offset by the slightly increased sales price, allowing for a similar net profit and quicker closing. The seller assist is itemized on the closing disclosure or settlement statement.