- An uneducated buyer can leave a lot of money on the table if they aren’t familiar with the local market and what to ask for
Buyer or Seller Market?
Whether or not you get any seller concessions, and how much, depends heavily on the local real estate market. In buyer friendly markets, sellers often offer more generous concessions to entice buyers to their homes. In seller friendly markets, sellers don’t need to do this, because buyers are often offering aggressively just to get a home.
- A buyer’s market is a market area with over 6 months of home inventory.
- A seller’s market is a market area with under 6 months of home inventory
“Months of inventory”, is calculated by dividing the number of active listings by the number of homes sold in the previous month. Example, 128 homes sold in the last month in Killeen, versus 515 active listings today. 515 / 128 = 4 months of inventory in Killeen.
In the Fort Hood area, the market is healthy (as the 4 months inventory above shows). However, even at under six months inventory, it still behaves heavily as a buyer’s market. There are a few reasons for this. There is a large number of builders in the area that routinely offer generous concessions that homeowner must keep up with. Also, the prevalence of the VA loan and 100% financing means that many buyers can close with $0 due at closing if the seller concedes closing costs and other closing related expenses.
Note that your agent’s commission is not considered a concession. Commissions are paid by the seller and the buyer agent’s commission is offered through the MLS.
The seller concessions do not come out of thin air. The seller pays them, and can be a steep transaction cost to Fort Hood area sellers who are often responsible for most if not all of the transaction costs.
Here is an example of seller concessions, approximately in order of the most likely you are to get them accepted:
- Financing Contingency
- Option Period
- Title Contingency
- Owner’s Title Policy
- Closing Costs
- HOA transfer fees
- Home Warranty
- Contingency on the Sale of Other Property
- Temporary Lease
Fort Hood Buyer’s Closing Costs
- Fort Hood VA buyers often come to closing with $0
- Don’t forget to budget for inspections, earnest money, and option fees
- For properties listed on the MLS, the seller pays the buyers’ agent’s commission
Builder concessions are different. While builders are less likely to negotiate on the price than preowned home sellers, they are often more flexible on some concessions like upgrades and closing costs. Different builders behave differently, which is why it is important to have a Realtor on your team with experience with local builders.
For custom builders, concessions tend to be minimal. They may offer a token amount toward the closing costs, title policy, and the survey. You are paying them to build your perfect home, and you are expected to pay the full price.
Non-custom builders usually have more flexibility than preowned home sellers. Often instead of the price, builders are more willing to throw in upgrades to the home like sprinklers, extra landscaping, upgraded fixtures, etc. Some builders have an amount set aside for concessions. This amount can be used very flexibly – even to pay off unrelated car loans or student debt as a concession!
Builders are more likely to be able to work with a contract contingent on the sale of your other home, which is great. Tract builders often have low earnest money amounts which can make walking away relatively painless.
Banks do not give many if any concessions. The VA is the most prominent owner of Fort Hood foreclosures, and all you can expect from them is a generous option period. You can ask for seller paid closing costs, but many banks expect you to raise the price by an amount equal to the concessions, meaning the change is a wash. Doing so isn’t to get a better deal, but reduces the money due up front.
Note that banks sometimes use their own contracts, and, unlike the Texas Association of Realtors contract, lump title policy and closing costs together. That means you need to be sure to ask for enough to cover both if you want them to cover your full closing costs.
The market is always changing. If the Fort Hood market continues to improve, it is possible that things begin to swap and turn more seller friendly. Setting expectations on the closing costs is one of the most useful things a Realtor can do for you, and a major reason why having one is a monetary benefit to you. Missing out on seller paid closing costs or repairs can be $1000s or even $10,000s left on the table.