Depending on the real estate market, some buyers will be asking for closings costs to be allowed to be paid by the home seller.
Closing costs for a home buyer include three things.
Home Buyer’s part of Escrow Fee’s.
Home Buyer’s part of Title Fee’s.
The Home Buyer’s Lender Fee’s.
Typically these costs are 1% each. Of course two of the buyer closing costs fees are typically set by sales price.
The wildcard in the bunch is the fee which is being charged by the lender to the home mortgage borrower.
Some reasons why you would not want to pay a buyer’s closing costs.
It could be that the buyer added their closing costs to the listing price amount of your home. You maybe concerned that your home would not appraise for that “higher than listing price” amount.
Maybe you are overpriced in the first place. Maybe the home buyer is offering asking price, asking for closing costs to be taken from that amount. You might think that your new “net” amount is too low.
if a home buyer offers you the list price on your home priced at $500,000.00 and asks for $15,000.00 in closing costs – your gross proceeds will be taken from $485,000.00. This is the listing price of $500,000.00 minus the closing costs $15,000.00 that the buyer is requesting – equating to $485,000.00.
It could be that the home buyer is going to pay half and is asking you to pay half. You maybe concerned with appraisal or you may have other offers which aren’t asking for closing costs.
That is the key – if the seller has other offers at full price, or close, which aren’t asking for closing costs and their financing is solid – they won’t give a second look to those buyers asking for closing costs.
A buyer does not want the seller to pay closing costs because the buyer has not pre-planned. There are many reasons why. Some come down to the buyer having the down payment, but not having the funds to pay those closing costs fee’s.
Some home buyers don’t have the ability to pay that additional 3% fee that constitutes their closing costs and try to have them included in the loan so they can be financed. This request for the seller to allow the buyer to have the closing costs included as additional to the seller’s listing price could raise concern when it comes to appraisal value.
If the home seller agrees with allowing to include your closing costs to be included on top of the price you offered, you are golden. However, if the property does not appraise for that “new value”, it could cause the seller some distress.
Distress will come in the form of the appraised value being less than the total offering amount. The remedy to this situation will be on behalf of the home buyer. If they agree to inject cash to meet the agreed upon amount, the seller has no issues. However, the ability of the home buyer having a loan program or lender which will allow this action could be in question.
The only other two options is for the home seller to reduce their home price to appraised value, cancel the deal or ask the home buyer to step up.
There is also the option of meeting somewhere in the middle. That’s about it for “closing costs” options.
Some home buyer’s don’t think twice and think that the real estate seller is playing hard ball.
If that same home buyer were selling their home, and if they had buyers making offers not asking for closing costs – they’d probably choose the “non closing costs” asking buyers.
Be best advised when it comes to real estate. Make sure you are working with a real estate professional. I have several who work for me and I’m one as well. Please reach out to me when you are ready. I’m Connor Macivor with REMAX gateway and I’m glad to be at your service for everything that is real estate.