Seller Contribution

Author: Terri Ewing | Date: July 29, 2008 | Filed In: Glossary

Seller Contribution Defined

A seller contribution is money paid by the seller for closing costs or a down payment that is normally paid by the buyer. Different loan programs have different restrictions on how much the seller can contribute and for what.

For example, on a conforming loan you put 5% down so the seller can contribute 3% of the sales price or appraised value whichever is less. Let’s say your appraised value is the same as the purchase price at $200,000. That means the seller can pay $6,000 ($200,000 X 3%) of your costs. You can use that money to pay origination fees, discount points, hazard or title insurance costs, days of interest, etc.

This works for buyers that need a little help with money for the down payment or asset reserves. Some approvals require you to have a certain amount in your bank account at closing. Negotiating with the seller to just lower the price doesn’t help you. However, negotiating with the seller to contribute towards your costs gives you that extra $6,000, as in the example above, to use for the down payment or any reserves needed.

See article, Real Estate Closing Costs Paid By Seller a Catch-22, for more.

Author: Terri Ewing