Sellers’ Concessions Caps Keep the Housing Market in Check

Sellers’ concessions can make it more affordable to buy a home by helping to pay some or all of your closing costs. However, there is a limit to how much assistance you can receive, and the cap is generally a percentage of the sale price. There are several reasons why such caps exist, and they almost all have to do with ensuring that the housing market remains stable.

Excessive Contributions Could Lead to Inflation

Let’s say a home was on the market for $100,000, and the seller was eager to liquidate the property as quickly as possible. In exchange for providing $10,000 in closing cost assistance, the sale price of the home is increased to $110,000. While you aren’t paying any more to buy the home, future sales will be based on the price that you paid for the home. Over time, this increase in home prices will not remain sustainable, which could lead to a market crash.

Sellers Could Provide Kickbacks to Buyers

If a seller were allowed to make unlimited concessions, they could contribute more than the total of a buyer’s closing costs. The difference could then be given to the buyer in the form of a cash payment. The cash payment could be an incentive to overlook the lack of proper disclosure or other illegal activities related to the sale. Unlimited seller concessions could also be used by criminals as a method of laundering money.

Calculate Concession Amounts Prior to Making an Offer

The good news is that it is easy to calculate how much you can receive in seller concessions prior to closing on a purchase. A real estate agent, your attorney or a loan officer in Las Vegas may be able to explain more about how they work and how much you can legally ask for.