What is "Seller Assist?"
I often find myself explaining "seller's assist." Hopefully this brief article will clarify a few things. For those who prefer video, I've made a silly and extraordinarily low budget video here.
"Seller's assist" is money returned to the buyer at the close of escrow which is used to pay some of the buyer's transaction costs. There are a few different ways to conceptualize this, but I see it as enabling buyers to roll some of their closing costs into the mortgage.
Let's take a look at the following example:
- List price of the home is $300,000
- Closing costs will be about $20,000
- Fair market value of the home is somewhere between $280,000 and $300,000
Let's say the buyer loves this home, but they really don't have $20,000 available. They are comfortable paying $10,000 at closing, but $20,000 is just too much. No problem: "seller's assist" is a great solution for this issue: just make a $10,000 seller's assist part of the offer. That way, at closing, $10,000 of the closing costs will be paid by the seller.
If the offer is $300,000 with $10,000 seller's assist, the net price to the seller is actually $290,000 since the seller will be paying $10,000 of the buyer's closing costs. There are pros and cons to consider here:
Pros of Seller's Assist for the Buyer:
- Less cash required at closing
Cons of Seller's Assist for the Buyer:
- Slight relative increase in closing costs indexed to sale price (taxes, some fees)
- Some increase in monthly mortgage payment and total debt
- Possible higher tax assessment and resulting higher property taxes
Pros of Seller's Assist for the Seller:
- Enables more qualified buyers to make offers even if they don't have quite enough savings.
Cons of Seller's Assist for the Seller:
- Slight relative increase in closing costs indexed to sale price (taxes, some fees, commissions)
When I say "slight relative increase," I mean to compare an offer with seller's assist to a similar offer with the same net price. An offer of $300,000 with $10,000 seller's assist will net the seller slightly less than an offer of $290,000 with no seller's assist. The reason for this is that several of the closing costs for the seller are based on the total sales price, not the net.
Hopefully this brief article is useful. If you have further questions, don't hesitate to contact me!