Understanding Seller Concessions and the Recent NAR Settlement

Seller concessions play a vital role in making home purchases more feasible and attractive for buyers. Given the recent National Association of Realtors (NAR) settlement and its implications on real estate transactions, being informed about these concessions is more important than ever. In this blog post, we’ll explore the importance of seller concessions in the home buying process and how recent developments, particularly the National Association of Realtors (NAR) settlement, may impact your home purchasing experience.

What Are Seller Concessions?
Seller concessions refer to incentives that sellers offer to buyers to facilitate a smoother transaction. These can include covering closing costs, providing funds for repairs or upgrades, or even offering discounts on the purchase price. Essentially, seller concessions are designed to make a property more attractive and affordable for potential buyers.

Seller Concession Limits
The maximum limits on these concessions vary based on the type of loan and the down payment amount: 

• For loans on primary and vacation homes with a down payment of less than 10%, sellers can contribute up to 3% of the purchase price towards closing costs.
  
  
• If the down payment is between 10% and 25%, this limit increases to 6% for primary and vacation homes. 
  
  
• For down payments greater than 25%, sellers can contribute up to 9% on primary and vacation homes.
  
  
• On properties that are strictly investments, the maximum concession is limited to 2%. 

These limits are designed to protect both lenders and borrowers by ensuring that seller contributions do not inflate property values artificially or lead to excessive risk in lending practices. It is important to note, buyer realtor commissions, if paid by the seller, do not count towards concession limits.

Impact of the Recent NAR Settlement
The recent settlement involving the NAR has brought significant changes to how commissions and fees are structured within real estate transactions. Here’s why understanding seller concessions is especially crucial in light of this development:

• Transparency in Transactions: The settlement aims to increase transparency regarding commission structures and fees paid by buyers and sellers alike. As these changes unfold, it is likely that both parties will need to reassess their financial strategies during negotiations.
• Potential Changes in Buyer Costs: With adjustments in how commissions are handled, there may be shifts in overall transaction costs for buyers. Seller concessions could become an essential tool for offsetting any increased expenses resulting from these changes.
• Market Adaptation: The real estate market is always evolving; thus, understanding seller concessions will allow you as a buyer to adapt effectively to new norms and practices that arise from regulatory changes like those stemming from the NAR settlement.

As a homebuyer, it is beneficial to understand the facts and latest updates regarding seller concessions and how this impacts your next home purchase. Connect with one of our Coastal States Mortgage loan officers or visit the National Association of Realtors website for more information and additional resources.