What is a Sellers Assist?
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When a buyer is short on cash to purchase a home, the seller may step in to assist them in the purchase by paying some of their closing costs. For buyers, it essentially means they are rolling some of their closing costs into their mortgage.
For example, if the purchase price is 350k with a 7k sellers assist, the effective purchase price is 343k. The buyer appreciates that flexibility and will need to bring 7k less to settlement. The seller is happy to get the house sold.
There are some caveats as to how much sellers assist is allowed by the lender though. Below is a guideline, courtesy of Michael Lamborn with CBHL - Coldwell Banker Home Loans.
|Conforming Owner Occupied and Second Homes||Greater than 90%||3%|
|Non-Conforming Owner Occupied Only||75.01 - 90%||6%|
|75% or less||9%|
|Non-Conforming: Second Homes||Regardless of LTV/CLTV||3%|
|Investor||Regardless of LTV/CLTV||2%|
|Percentage of contribution must be calculated
using the lesser of the sales price or appraised value. The acceptable amount
of the contribution will be the lesser of the above applicable guidelines or
the actual closing costs.
LTV - Loan to Value
CLTV - Combined Loan to Value, if there is a second mortgage
These percentages are important and Realtors need to know this information when they write up the offers for their buyer clients.
While buyers love sellers assist as it allows them to purchase their dream home even if they are a little short on the cash they need, sellers may not be too excited in a recessive real estate market. Their house now has to appraise at the inflated value of purchase price + sellers assist. In a rising real estate market however, buyers who need sellers assist are perceived to be less strong and are passed over for stronger buyers who are cash rich.
What are your views on using sellers assist in a real estate transaction?