How to Get Creative in Real Estate Transactions
Real estate transactions sometimes stall. Buyers and sellers often come close to making a deal — but something stands in their way. Offers and counter-offers fly back and forth for weeks. Here are some ways buyers and sellers can close a stalled real estate deal by being creative.
Seller pays buyer’s HOA dues
A buyer considering a condo or a home with monthly assessments (or dues) may have trouble swallowing those costs in addition to the monthly mortgage payment. When buyer and seller are off by only a few thousand dollars, reducing the home’s price won’t do much for the buyer in the long run. For example, a $15,000 price reduction amortized over 30 years would end up saving the buyer just a few dollars every month.
Instead, a smart agent will suggest the seller pays the homeowners association dues for a year. This could save the buyer, say, $500 per month. Although that’s less than a $15,000 price cut, it could go help the buyer absorb the total monthly expenses.
The seller pays the property taxes
When a buyer and seller are off on price, the seller can offer to pre-pay the property taxes, thus removing the burden from the buyer.
The buyer rents back to the seller
Does the seller need more time in the home, but all parties want to move the deal along instead of doing a three-month escrow? Frequently, the solution is that the buyer allows the seller to stay in the home after the close of escrow for a pre-determined amount of time. In return, the seller pays the buyer a pre-determined amount for “rent.” This amount is often the buyer’s monthly mortgage prorated for the amount of time the seller stays behind.
The seller buys down the buyer’s interest rate
After using a mortgage calculator or talking to a mortgage lender, a buyer may wonder if he can afford the monthly payment. Sometimes, for the cost of 1 percent of the loan amount, the buyer can get a better interest rate, maybe 3.2 percent, and lock it in for 30 years. This may be a smart idea if rates are rising and the buyer prefers to pay an out-of-pocket cost upfront as opposed to over time. When faced with a seller who won’t budge on price or a buyer who has hit his monthly cost limit, the seller may offer to buy down the mortgage rate. The cost to the seller will likely be less than a price reduction.
A deal between buyers and sellers can get derailed in the eleventh hour. When that happens, the agent should get to the bottom of what’s really going on. It’s time to put heads together and come up with a creative compromise.