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What is a seller credit?

When a buyer is writing an offer, they will notice there is an option to ask for a seller credit. This is purely optional and is a negotiable item just like everything else.

Sometimes a buyer will want to ask for a seller credit to help with the closing costs so that they can purchase the property with less money out of pocket. It is essentially a way to finance the closing costs.

Another common situation where a seller credit may apply is in the case that a buyer does an inspection, finds a problem with the property, and then a seller credit is negotiated in lieu of a repair being made.

There is a way to structure an offer to where it can be a win-win for buyer and seller. You can increase the purchase price by the amount of the seller credit, and include a seller credit. In that case, the seller could still net what they want, and the buyer can get the seller credit they need to help make the purchase possible with less out of pocket costs. 

If the buyer is getting an appraisal, you will want to exercise caution when structuring the deal this way. The property will need to appraise at the purchase price, so if it’s inflated too much to cover the credit, the appraisal could come in low and you’ll need to renegotiate. Appraisals can vary, so if it’s a small and reasonable amount relative to the purchase price, it often isn’t a problem.

If you are a buyer writing an offer and asking for a seller credit up front, it would be a good idea to mention the reason why to the seller. Also, be sure to check with your lender if you are getting a loan because the lender may have certain restrictions on this as well. Most commonly, the seller credit should not exceed the amount of the buyer’s closing costs.

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