What Are Sellers Credits and How Can I Take Advantage of Them?
It’s no secret that buying a home can put a lot of financial pressure on prospective homebuyers. In addition to a down payment, which oftentimes eats up most of a buyer’s savings, there are a host of additional costs and fees that stack up during closing.
In a buyers’ market, a seller may need to further incentivize prospective homebuyers, especially if closing costs put your home just out of a buyer’s budget.
And that’s where sellers credits come into the picture!
- First of All…What Are Sellers Credits?
- What Can Sellers Credits Be Used For?
- So What Costs Can Sellers Credits Cover?
- Are There Limits on Sellers Credits?
- Additional Resources
First of All…What Are Sellers Credits?
Sellers credits, also known as interested party contributions, are costs that are normally the responsibility of the homebuyer (like closing costs) that are paid by someone else who has a financial interest in or can influence the terms and sale or transfer of a property. While sellers credits can be covered by interested parties including property builders, developers, real estate agents, or brokers, they are most commonly covered by the seller of a property – hence the name.
When a seller gives a buyer a sellers credit, they are offering to cover some of the closing costs or other costs incurred by the buyer when purchasing the home. Most common in a buyers’ market, sellers credits can be offered for a range of reasons including making a home more financially attainable for buyers or trying to sell a home quickly.
What Can Sellers Credits Be Used For?
Sellers credits are a useful tool for both sellers and buyers because they can be used to cover a range of costs related to the homebuying process.
When you have your heart set on a home, having an inspection reveal it needs repairs can feel like a setback or even a reason not to buy. However, sellers will often offer a sellers credit to the buyer to avoid having the deal fall through. It’s important to note the seller doesn’t pay for the repairs directly, but contributes more toward closing costs so the buyer has more funds to cover the repairs.
2. Incentivize the Buyer to Close Quickly
If you’re looking to sell your house quickly and you want to nudge a buyer to close on your timeline, offering a sellers credit can help incentivize the buyer to agree to purchase your home.
3. Attract Additional Buyers
In a buyers’ market, you may have difficulty finding prospective buyers. Offering a sellers credit is a great way to get your listing noticed.
4. Help Covering Closing Costs
Coming up with the funds for a down payment and closing costs is perhaps the biggest obstacle facing homebuyers. Sellers can offer to include some of the closing costs into the purchase price of the home, and then offer to cover the closing costs with a sellers credit thus reducing the amount of money the buyer needs to pay up front.
So What Costs Can Sellers Credits Cover?
Depending on the type of loan, what sellers credits can cover may vary, but generally they can be applied toward most of the general closing costs involved in purchasing a home including:
- Loan Origination Fee
- Discount Points
- Appraisal Fee
- Inspection Fee
- Title Insurance Fee
- Attorney Fees
- Recording Fees
- Property Taxes
Are There Limits on Sellers Credits?
Depending on the loan type, there are limits on how much a seller can contribute toward closing costs via sellers credits. The table below outlines sellers credit contribution limits by loan type.
Whether you’re buying or selling a home and want to learn more about how you can potentially use sellers credits to your advantage, our dedicated team of Loan Officers are ready to answer any questions you have.