So, you’re selling your first home: After countless weeks of keeping it spotless and showing it to prospective buyers, you finally found someone! This person is serious and willing to pay your asking price. You breathe a huge sigh of relief. Your home is nearly off the market.
That is … until you start negotiating, and the buyer asks you for $2,000 in concessions. Your moment of zen is immediately replaced by this:
You ask yourself, “So, they’re willing to pay $200,000 for the home, but they’re asking me to give them $2,000 back. Why wouldn’t they just make an offer for $218,000 instead?”
Well, it turns out your buyer budgeted just enough cash for the down payment, but they didn’t take closing costs into account. In Georgia, origination fees from the lender and other third-party fees (e.g. attorneys, appraisals, etc.) were an average of $2,303 in 2016. That’s a hefty sum for someone who hadn’t factored in those costs.
Enter: Seller concessions.
In this case, you and the buyer would agree to increase the price of the home to $222,000. You make a commitment to pay the closing costs with that extra $2,000, and you still receive your asking price of $200,000 for the home. Meanwhile, the buyer has their closing costs paid, and that extra $2,000 is rolled into their mortgage.
It's all a bit crazy, but increasingly necessary for a lot of buyers who need help with closing costs, as well as sellers who want their homes off the market.
Year over year, sellers in Metro Atlanta are leaning more on these contributions to help close their deals. Here’s what we’re seeing in several counties.
Some 60% of sellers made concessions in January 2017, compared to 51% who did the same in January 2016.
Year over year, those contributions went up 36% – from $1,839 to $2,503, with sales in Atlanta, Alpharetta and Roswell leading to the largest concessions. This increase is significantly higher than the rate at which home prices are going up. The median price for homes in January was $253,000 – 10% higher than it was last year.
Despite seller concessions increasing 36% year over year, it is still taking folks the same amount of time to sell their homes. On average, homes that sold last month in Fulton were on market for 71 days – just as they were the year prior.
In Cobb, a staggering 68% of sellers made contributions last month. Just 58% did in January 2016. The average concession came out to $2,703 – a nearly 25% increase over last year.
Homes in Marietta largely led to the high number of seller concessions.
With an 8% year-over-year increase, home prices in Cobb went up at about the same rate for the overall market. Homes in the county went for a median price of $253,500 last month.
The seller concessions may have contributed to a significant decrease in days on market. Last year, homes that sold in January were on the market for 76 days. Those that sold this year, were on the market for 62.
Some 66% of sellers in Gwinnett gave contributions last month, compared to the 56% who did the same in January 2016. Concessions increased 32% to $2,735.
No particular city in Gwinnett led the charge in home concessions. We saw them distributed pretty evenly from Suwanee to Braselton to Lawrenceville to a handful other areas.
The year-over-year increase in home prices was 13%, bringing them to a median of $210,000.
Meantime, days on market decreased by five days. While homes that sold in January 2016 were on market for an average of 77 days, the properties that went this year sold in 72.
Interesting things are going down in Forsyth. The majority of sellers—68%—offered contributions to their buyers, and at a higher amount than sellers in neighboring counties. Last month, concessions in Forsyth were at an average of $2,779. This is a 22% year-over-year increase from the contributions that were offered during the same time last year.
It all makes sense, as homes in Forsyth are significantly more expensive than homes in other counties. Properties in the county went for a median of $308,000 last month.
Despite the high amount of concessions being offered, sellers in Forsyth continue to have a difficult time getting their homes off the market. In January of last year, homes sold after an average of 76 days on market. Last month? It took a whopping 90 days.
Seller concessions increased more in DeKalb than in any other county. Contributions went up 42% year over year to $2,549.
With the median price of homes rising approximately 18%, it definitely follows that concessions would increase considerably.
Some 62% of sellers offered their buyers contributions last month, compared with 53% who did the same last year.
Days on market decreased by two days, but it is still taking sellers in DeKalb two months, on average, to sell their homes.
If you’re preparing to sell, it is crucial that you look into concessions before the process gets underway. In some cases, a direct payment from a seller to a buyer in considered an “inducement to purchase,” and it’s a huge no-no. Loan companies have pretty strict guidelines about how much sellers can contribute to their buyers’ closing costs.
Despite all of this, sellers in Metro Atlanta are increasingly giving concessions, and it seems as if it’s becoming more of an expectation to buyers. They could very well be the “make or break” factor in a deal.
There are several ways, however, to make this a win-win situation for all. To learn how you can still contribute concessions to the buyer, while avoiding all of the paperwork, read up on the Knock method.