October Q&A Series Q10: Should I ask for a price reduction or seller credit when buying a Portland home?

Question 10: Should I Ask for a Price Reduction or Seller Credit When Buying a Portland Home?

Your inspection turned up a $10,000 problem. The seller is willing to help. Now you get to choose how: knock $10,000 off the price, or give you a $10,000 credit at closing. They sound identical. To your wallet, they really aren’t.

The worked example

Assumptions: $500,000 contract price, 5% down, a sample 6.5% rate on a 30 year conventional loan, and about $13,000 in closing costs and prepaids. Illustration only.

The credit keeps about $9,500 more in your bank account today. The price reduction saves about $60 a month. At that pace, the reduction takes roughly 13 years to catch up.

One Oregon wrinkle: property taxes here are generally based on assessed value, not your purchase price. So a lower price usually doesn’t lower your tax bill the way buyers in other states might expect.

When a credit makes more sense

• Cash is tight, and you’d rather have money in reserve for the repair itself or the first year of ownership.
• You want a lower rate. Many lenders let a credit go toward buying down your interest rate, which can beat a price reduction on the monthly payment.
• The repair can wait a little while you settle in.

When a price reduction makes more sense

• You have plenty of cash and care most about a lower long term loan balance.
• The appraisal is tight. If the home might appraise below contract price, a lower price can solve two problems at once.
• Your credit would exceed the lender limit (more on that below).
• You’re a cash buyer!

And sometimes the seller should just fix it

If the issue affects safety, insurability or your ability to get the loan, a credit doesn’t help much. A leaking roof, a failed electrical panel or an active sewer problem may need to be repaired before closing, by a licensed contractor, with receipts.

Lender limits you need to know

Credits can only pay for allowable closing costs and prepaids. They can’t come back to you as cash, and any amount you can’t use may simply be lost. Loan programs also cap how much a seller can contribute, often based on your down payment and loan type. A credit that’s too big for your actual costs or your program’s limit needs to be restructured, which is why I check with your lender before any final decisions are made.

Negotiating after inspection? Let’s run both versions with your lender’s real numbers before we choose.

Example figures are illustrative. Confirm credit limits and payment estimates with your lender.