We recently received a purchase contract with a $600,000 price, and $26,000 in seller-credits.

The issue? The $26,000 seller credit exceeds our $19,000 estimate of closing costs (closing costs are “high” b/c they include impounds and Oakland transfer taxes). The credit is $7,000 too large.

Note: Seller Credits can be used towards any closing costs – recurring or non-recurring. Seller credits cannot be used to pre-pay property taxes or HOA dues.

Solutions: (1) Reduce the price of the house and the seller credit by $7,000; (2) Use the extra $7,000 to buy down the interest rate; (3) reduce the credit by $7,000, leave the price the same, BUT have the seller do $7,000 of improvements prior to close (works well if seller is a builder).

We always recommend the 1st option. The extra $7,000 cannot go back to the buyer in the form of cash, and it cannot be used to pay down principal. If the credit is unused, it is simply wasted; a “gift” to the seller.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646

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