FSOB: Home Valuation (5): Know Your Bottom Line Before You Begin to Sell & Terms and Seller Concessions


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Know Your Bottom Line Before You Begin to Sell

After setting the price at which you will offer your house for sale, you should be prepared in advance to have a minimum price you are willing to accept. Depending on how long your house is on the market for sale, that number may change. For example, if you recently began offering your house for sale, you may not be as flexible on what you are willing to accept. On the other hand, if you’ve been trying to sell your house for several months, you may be willing to accept a little less. If you’ve priced your house appropriately to begin with, the minimum price you are willing to accept should not be that much less than the offering price. While you should keep in mind the pricing strategy discussed in the previous section--offering your house for sale slightly above your true objective--you should also be mentally prepared to accept less.

Terms and Seller Concessions

In addition to having a predetermined minimum price you are willing to accept, you should also know whether or not you are willing to offer any type of owner financing or seller concessions the buyer may ask for. For example, if a buyer can’t come up with the full down payment, it may be helpful if the seller is willing to provide financing directly to the buyer. When seller financing, or owner financing as it is also known, is used, the buyer makes payments directly to the seller under whatever terms and conditions the two parties agree on. The seller, whose interest is secured in the form of a second mortgage, receives payments from the buyer over a period of time that is agreed upon by both parties. The note may be paid over a period of 5, 10, or even 15 years. It may also include a balloon payment in which the note would be due in its entirety in 3 years. Notes can be structured in any number of ways to meet the needs of both the buyer and the seller. As the seller, you may prefer not to offer any type of financing to the buyer for whatever reason.

In addition to owner financing, buyers sometimes ask for seller con cessions. Seller concessions include things like having the seller con tribute a certain dollar amount or percentage of the sales price to the closing costs. Just last week, for example, I received an offer on one of our new houses that included a 3 percent seller concession. The house was listed for sale at a price of $175,000. This means the buyer was asking me to contribute $5,250 toward his closing costs. I countered his offer by agreeing to contribute a fixed dollar amount of $3,500. In addition, I raised his offering price by $3,000 to help offset the amount he was asking me to contribute. As it turned out, the buyer was already at his maximum borrowing power and therefore at his upper limit, so he ended up rejecting my counteroffer. In summary, you should be prepared in advance to know whether or not you are willing to offer any type of owner financing or seller concessions that the buyer may ask for.

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