My agent advised me that its common to get a 3% cash concession from the seller when purchasing a home to cover closing costs. I want to know what negative affects this might have by taking cash in lieu of lowering the purchase price by the same amount? That would mean 100k price and getting a 3k refund vs straight 97k purchase price.
Assume that down payment is 20% of purchase price in both cases.
The only difference I am aware of, is slight increase in closing costs (since the loan is larger), and the associated larger monthly payment. Are there any other downsides? For example:
- Are there restrictions on what the concession amount must be spent on?
- Is there a requirement to return unspent concession to the seller?
- Is the concession a taxable gain by the IRS?
If one does not need the concession to purchase a home, is it better to simply purchase for the equivalent price without the concession?