credit on home purchase: take off sale price or closing costs?

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blackburnian
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Joined: Thu May 04, 2017 12:40 pm

credit on home purchase: take off sale price or closing costs?

Post by blackburnian » Mon Apr 15, 2019 4:04 pm

I just had an offer accepted on a condo today (thanks to Bogleheads who helped me decide I could afford it), and the owners agreed to $5000 credit for needed repairs. It is a cash sale. I can either have the purchase price decreased by $5000 or have that amount go toward closing costs. Which would be better? Are there tax implications for one or the other?
Thanks!

JoeRetire
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Re: credit on home purchase: take off sale price or closing costs?

Post by JoeRetire » Mon Apr 15, 2019 4:08 pm

Why did you ask for a credit in your offer letter, rather than just offering a lower price, if you didn't already have something in mind for the credit?

Where will the cost of repairs come from if you choose to reduce the price instead of taking the credit?
Last edited by JoeRetire on Mon Apr 15, 2019 4:09 pm, edited 1 time in total.

delamer
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Re: credit on home purchase: take off sale price or closing costs?

Post by delamer » Mon Apr 15, 2019 4:08 pm

Purchase price credit will reduce taxes/stamps due at closing.

fulltilt
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Re: credit on home purchase: take off sale price or closing costs?

Post by fulltilt » Mon Apr 15, 2019 4:22 pm

delamer wrote:
Mon Apr 15, 2019 4:08 pm
Purchase price credit will reduce taxes/stamps due at closing.
And, depending on where you live, subsequent years' taxes....

Topic Author
blackburnian
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Joined: Thu May 04, 2017 12:40 pm

Re: credit on home purchase: take off sale price or closing costs?

Post by blackburnian » Mon Apr 15, 2019 4:52 pm

Thanks for quick replies. Joeretire: they accepted my first offer with inspection contingency, inspection found some repairs needed, I negotiated a credit, they accepted.

JoeRetire
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Re: credit on home purchase: take off sale price or closing costs?

Post by JoeRetire » Mon Apr 15, 2019 4:54 pm

blackburnian wrote:
Mon Apr 15, 2019 4:52 pm
Thanks for quick replies. Joeretire: they accepted my first offer with inspection contingency, inspection found some repairs needed, I negotiated a credit, they accepted.
Ah, I see.

I wonder if you bought my house? I just sold it and the same contingency and credit happened. I guess not, since we already closed.

All things equal, reducing the purchase price probably makes the most sense. Good luck with your new home.

oslocal
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Re: credit on home purchase: take off sale price or closing costs?

Post by oslocal » Mon Apr 15, 2019 5:46 pm

Reducing purchase price may increase capital gains taxes due if your home appreciates more than the personal exclusion (currently $250k/$500k single/MFJ) and you sell it down the road.
It may also affect your neighborhood's real estate prices as a slightly lower comp.

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