Are you getting a mortgage? How the credits are handled depends on the mortgage company. Normally the only kind of seller credits that they will allow are towards closing costs. Banks do not like to allow cash back to buyers at closing because they have no guarantee that the repairs will be completed, meaning that the home that they are lending on may not be worth the purchase price. Why don't you just offer them a lower purchase price.

We once received a "decorating allowance" of a few thousand dollars for a house that needed a lot of redecorating. The "decorating" allowance just meant to us we had to bring $2000 less to the table for closing.

My son just bought earlier this year and asked for $7500 in closing costs. The seller came back by lowering the price on the home by $1500 and offering $6000 in closing costs. It was explained to him that closing costs would only be $6000 and the lender wouldn't let him walk away with the excess $1500. Not sure if this depends on the area or the lender.

Personally, if I'm getting any concession, I want it on price, not closing costs. I'd rather take more cash to the table and have a lower mortgage amount.

Thanks, terriks and cordovamom. The sellers lowered their asking price by 25K and at the same time offered these new credits totalling 15K. I guess this is another thing that has me confused. I am guessing that they are expecting a full price offer (meaning their new full price that has been lowered by 25K) and will give the credits to the buyers who present a full price offer. Whether they'll give the credits with a lower offer is unclear.

But I still don't get the matter of what happens if the closing costs come out to be less than 15K. My realtor doesn't think they will, but I don't understand how they can be that high. The taxes in our municipality are low...less than 5K. No estimate of closing costs we've ever been given by a lender doing a prequal for us has ever come close to 15K. What if the leftover is too much for the bank to let us walk away with? What happens then?

If the leftover is too much, the sellers get lucky and do not have to really pay $15K.

The lender only allows a percentage of the purchase price as a concession from the seller. The percentage is based on your downpayment. For example, Fanne/Freddie standards are if you put down 10% of the purchase price, the seller is allowed to give a 3% seller concession. If you put down gretaer then 10% to 25%, the seller can give a 6% concession.

If the seller gives a larger concession, the lender will subtract that amount from the agreed upon sales price to calculate a new loan-to-value (LTV) for your loan. (th lender does not actually change your sale price, it's just for calculating purposes) LTV changes can be big problems for you as a buyer.

As part of negotiations, we offered the buyers of our house $3k to use toward whatever they wanted--closing costs, repairs, cosmetics, etc. But in the end, their lender would only let them accept $2400 which was the amount of their closing costs.

Here's an example of what happened for us. Say you buy a house that costs $200,000. Closing costs are estimated to be $5000 and you'll be the ones paying them. You have $40000 for a down payment. Seller is going to give you $15000 in repair credits.

The sale price of the house, in effect, went from $200,000 down to $185,000. You still have the $40000 down payment which you'd have to have at closing. So your mortgage would be $145,000 instead of $160,000. At closing, you'd have to have your down payment of $40,000 plus the $5000 closing costs. Whatever amount you put down as escrow would be deducted from the $45,000.

It can be handled in different ways, but we took repair credits as a reduction of the sales price of the house.

Our purchase two and a half years ago had a credit of $3,000.00 to refinish the wood floors. The 3K was taken of the sale price.

Enjoy the journey.

eal51 in western CT