Ekabo Home Financial Freedom Mastermind Podcast
A podcast for those who do not believe they were put on this earth to work 40 to 50 hours per week for 40 to 50 years, to hopefully retire at the age of 65.
Ekabo Home Financial Freedom Mastermind Podcast
155. Seller Credits That Beat Price Cuts
🌟 Navigating Seller Credits and Creative Financing in Real Estate: Insights for 2026! 🌟
Welcome to the Ekabo Home Financial Freedom Mastermind Podcast! In this episode, host Niyi Adewole shares innovative strategies for leveraging seller credits in real estate transactions and discusses how to creatively navigate financing challenges. Join us for an engaging conversation filled with valuable insights and practical tips!
🔥 The Quote of the Day:
"Creativity is intelligence having fun." This quote serves as a reminder of the importance of thinking outside the box when it comes to real estate financing.
🎙️ What You'll Learn:
- Understanding Seller Credits: Niyi explains how seller credits work and their limits based on loan types, including FHA and conventional loans.
- Creative Solutions for Buyers and Sellers: Discover how to creatively allocate seller credits for home improvements, allowing buyers to secure necessary repairs without exceeding credit limits.
- Negotiation Techniques: Learn effective negotiation strategies to maximize seller credits while ensuring the deal remains beneficial for both parties.
- Real-Life Examples: Niyi shares personal experiences and case studies where creative financing has led to successful transactions, highlighting the flexibility and opportunities within the real estate market.
🏡 Key Takeaways:
➤ Think Creatively: Utilizing seller credits creatively can lead to significant advantages in real estate transactions.
➤ Focus on Improvements: Directing seller credits towards necessary home improvements can enhance property value and appeal.
➤ Stay Informed and Adaptable: Understanding the nuances of financing and negotiation can empower you to make informed decisions in the real estate market.
⚛️ Why This Matters:
As we approach 2026, it's crucial to stay proactive and informed about real estate financing strategies. By integrating creativity and strategic thinking into your approach, you can navigate challenges and seize opportunities in the evolving market.
🗓️ Tune in every Wednesday at 7 PM Eastern! Don’t miss out on our journey toward financial freedom through smart investments.
👉 Hit that subscribe button and turn on notifications so you never miss an update! Let’s unlock your potential together!
Our Links
➣ Financial Freedom Mastermind Facebook Group - https://www.facebook.com/groups/53083...
➣ Peer Space Host Referral Link https://www.peerspace.com/referrals/g...
➣ AirBNB Host Referral Link https://www.airbnb.com/r/niyia41
➣ Ekabo Home Network (IG, Youtube, Email) https://linktr.ee/ekabohome
Niyi Adewole is a licensed realtor in Georgia, brokered by EXP Realty. Feel free to reach out at Niyi.Adewole@exprealty.com if you would like to work with an investor friendly real estate agent.
Welcome to the Financial Freedom Mastermind Group Podcast. Here we're all about breaking free from the 40 to 50 year work ride and accelerating our journey towards financial freedom. Join us every Wednesday at 7 p.m. Eastern as we explore different types of investments that can fast track your path to financial independence. We serve as a hub for connecting with fellow members during our sessions so you can share successes, ask questions, and keep the momentum going.
SPEAKER_02:Good evening, everyone. This is Nigi Adawale, host of the Acaba Home Financial Freedom Mastermind podcast. And I'm excited to be joining you here on this Wednesday, January 21st. It has been an awesome month so far. We've been getting after it as the Akaaba Home Team, and I'm so excited for the year. I think it's just pretty cool what 2026 has in store for us already, and we're looking forward to continuing that. And so you're going to see some more content. You're going to see a lot more of the day-to-day that we're doing from the Akaaba home team because we heard more people want to see that. And so we're excited to do that all of 2026. But essay, let's talk about it, man. I know you want to talk about the credits, right? In a hypothetical deal and how you can get around going over the credit limit, right? On a conventional offer. That's correct. Yeah. Okay. And I like the I like the profile pick, man. This is cool. It's professional. And that tie is fire. I like that tie. Of course. So, okay. So when you're looking at this, right, there is a cap when it comes to different lending types. So if you're doing an FHA loan on a property, the cap is six percent in seller credits that you're allowed to have. If you're doing a conventional loan on a property, the cap is three percent, right? And so a lot of the deals that we do, we go over that cap in seller credits, right? And you do have to get it back down in that cap before closing. But what we found, and the way that we do this, is by looking for improvements that could be made to the property and funneling that money toward those improvements. And so, for example, right, I'm gonna shift over to the seller side and not the buyer side. There's a lot of sellers that we help where they can't afford to replace the roof that's messed up, right? Say a roof is completely messed up and it costs 10k to replace, and the they're the only way the buyer is gonna buy it is if they replace the roof, but they can't afford to pay for that until they close in the house. The way around that is the seller can go find the roofer and ask them to replace the roof and tell them, hey, we're gonna pay you from proceeds at closing. And the closing attorney will work that in. And at closing, once everything closes, there's a check cut at closing that's then handed to that roofer to pay them for that work. And that doesn't factor into anybody's credits. And so we reverse engineered that for a lot of our buyer clients, including myself personally. And the way that we do that is now we seek out improvements on the house. For example, let's say we get a house under contract where you know there's cast iron or there's a septic tank that needs to be replaced, and that cost could be, you know, 10, 15k. If you just took it all in credits, you would be over the limit. If you had, say, the 3% in credits, plus they gave you another 15,000. What we would end up doing is writing an amendment right before closing, and we would say all parties agree to reduce seller paid credits by the 15,000, right? After we'd already secured it. And all parties agree that 15,000 will be paid to this vendor from seller proceeds at closing in an amendment. And then at closing, what happens is the closing attorney is actually the one that cuts the check. It comes from them, they hand it to me, and I hand it to the buyer to give to that contractor for the work that is getting completed or is completed. Does that make sense?
SPEAKER_01:Okay, yeah, that I understand that. That that does make sense. I you're so you're saying that right before closing, there's an agreement on both parties to decrease the seller's credit, which is north of three percent, and that difference is being paid to the actual contractor. So during closing, we're still at that three percent mark.
SPEAKER_02:You are spot on. That's exactly how we're doing it and and getting around that piece because we're a little more creative. And the and then also when we're actually negotiating it during due diligence, we'll put a special stip in there, right? To make sure we're all on the same page. And it says seller agrees that seller paid credits, or really it says all parties agree that seller paid credits can be reallocated and escrowed for payment to contractors at closing. And that one line allows us to then do that final amendment a week before close.
SPEAKER_01:Okay, okay. I see now. I was blind and now I see. Hey, come on now.
SPEAKER_02:I know it's it's kind of it's a it's a weird thing to look at if you haven't been through this before. It's one where I kind of stumbled across it like four years ago on one of my personal deals. I was like, man, this is actually kind of cool. And and since then, I've taken it to the max. Like we've had some where you know we've gotten 100k in seller credits, you know, and and that's well over the limit, but been able to put it to use to get a crazy amount of things done inside a house. It's almost like negotiating for the seller to do all the things in a house. We've had deals where we've negotiated having a seller put in a kitchenette, and we've had deals where we negotiate the credit to have a kitchenette put in, both are the same in my mind.
SPEAKER_01:Okay, I see. So I guess um as a as a kind of like a branch of that, could you explain the benefit of having seller's credits or maximizing that as opposed to lowering the purchase price?
SPEAKER_02:Man, you were you were asking the hard-hitting questions, and I love it. And so I'm gonna explain that actually through a whiteboard session. So give me one second, let me get my whiteboard up and I'll share my screen. And we're gonna go Bill Nye the Science guy on this. Okay, so when you look at this, and where'd it go? Here we go. Okay, boom. Slide that over there and let me share my screen. Share, set, make it bigger. Okay, so please let me know when you can see my screen. All right, I can see it. Okay, so when you look at this, right, there's two ways you can go about it. I'm just gonna use, I'm gonna use some round numbers of an example. I'm just gonna call 500k as the example to make it a little easier. So let's say you have a house for 500k, right? 500k. And let's say we're talking about 30,000 in seller credits, right? So, and you're gonna put down 5%. This is gonna be a house hack 5% down. And so let's say one of the options is to get the house for 470k with no seller credits. Please excuse my chicken scratch. And the other is to get the house for 500k with 30k in seller credits. When you look at your down payment, right? We said it's gonna be five percent. And so five percent or four seventy is 23,500, 5% of$500K is$25,000. And so when you're looking at it like this, like just the down payment, it's like, hey, I'll take the$470 all day. I'm saving$1,500, but you got to take it a step further, right? Your closing costs on this are gonna be an average of about 3%, right? 3% to close on a property, and so 3% of 470 is$1,400 closing cost, right? 3% of$500K is$15,000. So still it can look like, hey, why am I not going through the other option? The main difference here is over here, you're coming out of pocket for$37,600. And over here, you're coming out of pocket for$25,000 because your$30K in credits is gonna cover this, right? Not to mention, after it covers that, you're still gonna have another$15k in actual cash that can be used on other things around the house. Say you need to replace a septic tank, right? Say you need to, you know, do cast iron, say you need to replace a roof. Yes, you could get the price reduced, but then you got to come out of pocket for that money with cold hard cash today, or you can get credits that get you the brand new roof that's gonna last 20 years and you don't have to pay for that right now. And oh, by the way, the overall cost of this when you factor in a mortgage of 15k is less than like$40 right a month, which as long as you believe that you can make more than$40 a month, right, with having that brand new item, I think it's well worth it. If somebody told you you could finance a brand new roof for$40 a month, uh no, you would take that all day.
SPEAKER_01:And so that's why I look at the and that's that, and and that's I guess it's a trade-off. And as it relates to your monthly payment on the mortgage, the$500K, you have a you still have a greater monthly payment on your mortgage, however, and you're able to get some stuff done.
SPEAKER_02:Sure. And so let's let's look at this, right? I'm going to open our new window and we're going to pull this up. So I'm going to go to Zillow and we're going to look at an option of a property. I'm going to go. This is one that we're actually looking at for another client. And it's 500k. That's where that number is in my head. I'm starting to think where I got the 500k from. So uh that's where it's in my head. And so let's go to the payment calculator, right? So if you're looking at this, let's say you're putting down that 5%. Let's say your interest rate's a little bit higher just to be safe. Let's call it 6.5, right? So your down payment's 24, uh, like this 500k, right? So your down payment's 500 5,000, right? And everything else is estimated. It factors in all this stuff, 6.5%. So it's a higher interest rate. Your payment's$3,000 and two dollars, right? Write that. Let me write that number down.$3,000 and two per month. And this includes everything. This includes your escrow, this includes taxes, all that stuff.$3,000 and two dollars per month, right? Now your$470 puts you at$28,000,$22. And so let's look at that, right? And this is everything factored in. This is a difference of$180, right, per month. Now, my question to you, and this is the same question you have to ask yourself when you're refinancing a property, is that$180 versus that$30K, how many months would it take you to recoup that$30,000, or really how many years based on$180 a month? And the answer to that is$166 months divided by 12. It's going to take you 13.8, call it 14 years to recoup that 30,000. If you had that$30,000 in your pocket, do you think you can put it in the SP and make more than$166 or$180 a month in in that time period? Yes. Hell, that thing is going to double twice. You're going to have that$30K if you just put it in the SP, it's going to be worth$90K uh 14 years later, right? Based on previous averages. And so this is the math that's always constantly running in my head, right? Is yeah, the minimal amount of money I can put down, I could put that money to better use. And then if I'm able to put that stuff into the property, it does two things for me. One, I get this brand new roof or septic tank or whatever paid for by the seller. And two, I also still have my appraisal contingency. I'm not doing the seller any favors, right? And this looks terrible now, but let me actually put this. I still have my appraisal contingency, right? To where if the home doesn't appraise for this value, I can now come back and fight them on the price. We just did this on a different deal where we were able to get the seller to agree to, and every deal is different, right? It depends on the seller's motivation. Seller to agree to replace cast iron. It was going to be about a 10K job. And we still have about 30K worth of credits. Now, this is a home where the appraisal came in super low. The appraisal came in at 535 and we had it under contract for 575 with that 30k in credits. And so it was rough. There was, I mean, that's a 40k difference. So one, we were able to go back and successfully fight that appraisal. We went line item by line item, which is what we do on the Akaaba home team. We don't just take an appraisal or a document at face value. We run it through the numbers and make sure, like, hey, does this make sense? And so we went line item by line on. We saw some discrepancies and we're able to fight it successfully. And they boosted the value to 565, which is a 10k difference. And then we were able to negotiate with the seller to then meet somewhere along that spectrum while keeping all those credits or most of the credits, which was good. So that's kind of how we work it. Does that make sense? So we got them on the value, we got them to come down and we got credits because we took the jab jab right hook approach, which is hey, first get in on a contract for a bunch of credits, then two, negotiate due diligence hard to see if you can get some more. And then three, have the appraisal be the end all be all. If this home appraises for you know 480, listen, guys, we want to close next week so you can get paid, but it prays low. So we need you to lower the price.
SPEAKER_01:Yeah, yeah, yeah. That makes perfect sense. Yeah, thanks for going through that. Of course. Does that help? Yeah, yeah, it definitely helps. Can I uh ask you a final question? Yeah, hit me. Like, have you run into a deal where the the buyer is approved at a certain number and they're able to go under contract for a property at a higher purchase price number? And how how is that even? I guess how does that work? How does it work that the lender approves or the underwriter signs off on a deal?
SPEAKER_02:Like so, it all depends on the lender, right? So the so you got to know your lender. Like our preferred lender usually goes under to stay conservative with his pre-approvals. So as long as you're within like a certain realm, you should be fine regardless. And then the other piece you got to factor in is they don't pull all the numbers or have everything until you actually get a property under contract. And so there's a lot that factors into affordability. One is credits, because the other thing I didn't go through, and I can show you here if I still got the I still got the Zillow. Other thing I didn't show you is, and can you see this? Yeah, I can see the other thing I didn't show you is say you're at 500k, and say instead of using those credits to do other stuff, say you use the additional credits to buy down the interest rate, say you take the interest rate from 6.5 to 6, you actually would end up paying roughly the same amount that you would at five or 470 by knocking that interest rate rate down by half a percent, which costs you about five grand to do, right? And you would be able to have your cake and eat it too. And so just with this small example, you can see how the affordability changes on a snap. That's$200 almost. That's like$160 something dollars, right? That it just went down by lowering the interest rate by half a percent. And so there's that, that's a lever that can be pulled. Another lever that can be pulled is the taxes, right? They don't know the exact taxes for that county until you know we have a deal under contract, and then also insurance, right? They're estimating all these things, and your insurance usually is estimated higher. That's how they give you a lower one. And then when you talk to our insurance broker, they're rock stars and they get the best deal possible, and it's a lot lower than what is estimated on those on those pieces. And so there's a lot of things being estimated on a pre-approval until you get a deal under contract. And then once you have the deal under contract, that's when it all comes together. That's when we're able to pull in the insurance guy, that's when we're able to pull in the tax records, that's when we're able to pull in and say, okay, what interest rate are we at? Interest rates are declining and kind of go from there.
SPEAKER_01:Okay, okay.
SPEAKER_02:Is that fair?
SPEAKER_01:All right. So there's yeah, there's a lot, I guess there's a lot of flexibility once once you have something on the contract to bridge that gap within realm, right?
SPEAKER_02:Now, if you were like, say, say you get a pre-approval for like, you know, 500, let's use that example, and now we're going after a property that's you know 750. Okay, you should go talk to the lender. Let's make sure that, like, hey, in what realm would I qualify for this? But if you have if you are approved for 500 and there's a property for, you know, call it 550, right? With the lenders that we utilize, you should still be fine, especially the way that we put deals under contract with some credits and things of that nature in taking that deal down.
SPEAKER_01:Okay, right.
SPEAKER_02:And that's why we have the financing contingency too, right? Typically, we'll set a financing contingency at 14 days. And so during that time period, if there's any issues popping up, we're gonna know and be able to go ahead and and bow out of that deal and get the earnest money back.
SPEAKER_01:Okay, beautiful. Thank you. Of course.
SPEAKER_02:Did this help? Yeah, yeah, yeah.
SPEAKER_01:It was very helpful.
SPEAKER_02:Yeah, thank you. It's good to have you on, man. Finally, you joined the financial freedom mastermind hey. I thought we were there was like two or three other people that were hit me up. I think they're gonna join a little bit later. But that's great. We switched this. We used to have it at 7 p.m. Uh when I was back when I was working at W2 like a few years ago, like 2020, 2021. Um, and then we switched it to four to five because it's like, what's the point of having it, you know, super late if you don't have to? So so this is our time now, every Wednesday.
SPEAKER_01:And that's good. I mean, people are able to join because they're getting off work and driving back, so it's a good time. Absolutely. Anything else to keep in mind? Um, well, the other questions I have are uh are specific to a deal. I'd like to have that in a more private setting. Sure. Uh maybe off this call. But no, no, those are those general questions definitely gave me greater insight. Appreciate it.
SPEAKER_02:Absolutely.
SPEAKER_01:I will catch you a little bit later.
SPEAKER_02:We'll definitely talk more about what you got going on and we've got to say, be safe, man.
SPEAKER_00:Join us every Wednesday at 7 p.m. Eastern as we explore different types of investments that can fast track your path to financial independence.
