The $612,000 Condo and the $1,365 Gap
Buyer Dana is under contract on a condo at 1301 V St NW for $612,000, closing February 18. Terms: 20% down, 30-year conventional, 1 origination point, estimated closing costs other than points $14,200, prepaids and reserves $6,300 (which includes the 2-month reserve requirement of $1,700), seller concession negotiated at $9,000 with a contract cap of 3% of price, and $15,000 earnest money already deposited from Dana's funds and separate from what remains. Dana has $130,000 liquid left plus a $20,000 retirement account loan available in 10 business days. The HOA fee is $285/month, paid monthly in advance; the seller has paid February. By local custom and this contract, the seller pays transfer tax and the buyer pays recordation tax at 1.1% on the first $400,000 and 1.45% above.
1. Compute Dana's cash needed at closing and determine whether she can close on time.
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Debits
- Down payment: 20% × $612,000 = $122,400
- Origination point: 1% × $489,600 loan = $4,896
- Other closing costs: $14,200
- Prepaids and reserves: $6,300
- Recordation tax: 1.1% × $400,000 = $4,400, plus 1.45% × $212,000 = $3,074 → $7,474
- HOA proration: seller paid February in advance; buyer reimburses 10 days (Feb 19–28): 10/30 × $285 = $95
- Total debits: $155,365
Credits
- Earnest money: $15,000
- Seller concession: $9,000
- Total credits: $24,000
Net cash to close: $131,365. Dana has $130,000 → short $1,365.
She cannot close as currently structured. Flag two items as estimates to confirm on the Closing Disclosure: third-party closing costs and the final tax figure. Also confirm the seller is in fact paying transfer tax ($7,474 on the same brackets) - if the contract shifted it to the buyer, the gap balloons to $8,839.
2. Can the seller concession solve the gap? Calculate the cap and the lender limits.
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Yes - this is the cheapest fix available, but only within two ceilings.
Ceiling 1: the contract cap. 3% × $612,000 = $18,360. Current concession is $9,000, so there is $9,360 of headroom.
Ceiling 2: allowable costs. Seller concessions cannot fund the down payment or required reserves; they apply to closing costs and prepaids. Dana's eligible costs:
- Point $4,896 + other closing costs $14,200 + recordation $7,474 = $26,570
- Plus prepaids net of the $1,700 reserve = $4,600
- Total eligible ≈ $31,170
So the 3% contract cap binds first at $18,360 - well above what she needs.
The fix: amend the contract to raise the concession from $9,000 to about $10,500 (a $1,365 increase closes the gap with a small buffer). That must be a signed amendment before closing, disclosed to the lender, reflected on the Closing Disclosure, and confirmed by the underwriter as within allowable-cost limits.
Watch item: the appraisal. A concession does not reduce appraised value, but if the appraisal comes in under $612,000, the price structure has to be reworked and the concession may be pulled into that negotiation. Confirm the appraisal is in before relying on this fix.
3. Rank Dana's options and identify the deadline and breach risks of each.
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1. Increase the seller concession to ~$10,500 (best). Costs the seller $1,365 of net proceeds, requires only an amendment and lender sign-off, and does not delay closing. Risk: seller may ask for something in return; appraisal must support value.
2. Seller price reduction instead. A $1,365–$1,500 price cut lowers the down payment and the point proportionally, but it reopens price negotiation and may require a new appraisal review and revised loan disclosures, which takes more time than an amendment.
3. Retirement account loan. $20,000 available in 10 business days is more than enough money - but the timing is the problem. If today is early February, 10 business days can land at or after the February 18 closing, and the lender will require documentation of the loan terms and sourcing, plus an updated asset statement. Borrowed funds can be acceptable, but not on a hope. Only pursue this as a backup and only after confirming the underwriter's requirements in writing.
4. Reduce the down payment below 20%. Lowers cash needed but triggers mortgage insurance, changes the loan amount and point, and requires re-underwriting and new disclosures. Slow and costly relative to a $1,365 gap.
5. Extend the closing date. Last resort. Time is of the essence; if Dana cannot perform on February 18 she is in breach, and the $15,000 deposit is at risk unless the seller agrees in writing to an extension. Never let a deadline pass while assuming the seller will be flexible.
Action list: request the amendment today, get the lender's written confirmation of the concession increase, verify the appraisal status, and confirm in writing who pays transfer tax.