Can Your Home Buying Decision Be Influenced By Sweeteners?
Buying a home is one of the biggest decisions anyone make in their life. There are a lot of factors that go into making that final decision, many of them financial. If financial issues are important, can your decision be influenced by sweeteners?
What are sweeteners? Sellers, and sometimes a seller’s real estate, will offer bonuses to help close a sale. These may include paying part of the closing costs or paying cash bonuses – sometimes both. In fact, what led me to this post was a sales listing that offered 3% towards closing costs plus $3,000 agent bonuses if the home was purchased at the listing price.
Now, 3% of the sales price plus $3k could be a tidy sum, depending on the price of the home. At $100,000 – that would total $6,000. Real estate agents like to sell homes at the listed price as it helps to boost their reputation, hence the offer of $3k for a sale at the listed price.
A buyer needs to be careful when considering sweeteners such as these. Their first question really should be – is it a real sweetener? This particular sweetener was on a home listed at $139,000. Could you knock the house down by more than $3k? If so, then a smaller closing price has a lot of flow-on effects – a smaller down payment, a smaller mortgage, and less risk of the closing price failing a lender appraisal.
It’s not often that a sweetener really benefits a buyer – there’s always a trade off somewhere, you just have to weigh up that trade off. It is becoming common for sellers to offer to pay some of the closing costs. However, if the walk-through inspection find items of concern, sellers will often trade off paying some of the closing costs instead of undertaking those repairs. For conventional loans, the maximum a seller can put towards closing costs is 3% – this closes that negotiation door for walk-through inspection problems. Some would say a good thing – you get a double bite of the cherry since the seller must now undertake those repairs.
Sweeteners are an important consideration when buying a home. You need to really analyze them carefully so you are sure you are really going to get a benefit from them. There are no free lunches these days, and while you may gain a benefit from a sweetener, just be sure you’re not losing out on other areas.
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