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It’s pretty amazing that you’ve saved up a good amount for a down payment on the average priced home in Southern California. Then you find out how much closing costs are during the pre-approval process.

You realize this might cut into your reserves fund. Suddenly money is a barrier between you and the home you want to buy. Well, fortunately, you may be able to still get the home by negotiating with the seller about certain costs

What are FHA Seller Concessions?

Concessions from the seller on an FHA govt. insured loan are the following:

It’s considered a sellers contribution if the sellers pays for all or part of:
Buyers closing costs or prepaid expenses
Buyers mortgage interest
Discount points
Mortgage interest for the buyer
Permanent or temporary buydown
Upfront mortgage insurance premium

Will Sellers Concessions” Start to Increase?
Closing cost contributions and other seller concessions are rare in a red-hot real estate market. That’s because sellers have plenty of competing offers to choose from. That has been the case in popular areas of California for years now.

In a seller’s market, homeowners are usually unwilling to pay the buyer’s closing costs or give concessions for the simple reason that they don’t need to. If you don’t buy the home someone else will.

In a multiple-offer scenario, the seller can pick the best offer from the lot. Nine times out of ten, it’s usually the offer that is all-cash, has a 20-percent down payment or more, and the least contingencies included.

An offer that asks the seller to give the buyer concessions is not the best choice and is usually accepted out of an urgency to sell.

However, the market did slow down in Orange County, San Diego and Riverside from mid-2008 to 2010. Home values were dropping and homeowners realized they were upside down on their mortgage. Before that happened to most homeowners, they attempted to sell or even walked away.

In a healthy housing market, there are periods where you will experience declines and have to lower your price and combine that with a seller concession to the buyer. Sometimes the listing agent will make a mistake and list the home far above its market value.

When the home sits idol with few offers, price reductions may begin to happen each month or the seller becomes more flexible and may offer concessions to help you. With the Covid-19 health crisis still wreaking havoc to specific industries, Los Angeles homeowners who work in these industries may be forced to sell, downsize, or move to Orange County where less lockdowns are prevalent. The result is the SoCal housing market could see a cool down.

Changes in the Orange County Housing Market
FHA seller concessions have been uncommon during the past few years, because the market largely imbalanced in favor of sellers. Although prices have posted records over the last few months to make Orange County’s real estate market make new record highs, there are predictions that things will cool off again over the winter months due to COVID-19’s negative influence on the job market and home affordability.

It’s fair to say that sellers may begin to offer FHA concessions to attract buyers if the market starts to trend in the buyer’s favor. At the moment, the average home price in Orange County is $795,000. Prices have risen 10% going back the previous 12 months, but are projected to decline a little during 2021, based on reports by Zillow.

The bottom line is that the Orange County housing market in late 2020 may still be very competitive with buyers paying over asking price, but there are worries of a decrease in the next few months due to the the present economic environment. If that takes place, sellers might want to start thinking about credits like paying for buyer’s requests mentioned above like loan origination points and other non-recurring closing costs.