Closing costs

sold2Often home buyers ask sellers to pay some of their closing costs because sometimes they don’t have enough cash for a downpayment and closing costs. Usually the seller is paying them with money that the buyer is borrowing.

For example the buyer buys a $200,000 house and pays $200,000 for it but asks the seller to pay 3% of the closing costs which amounts to $6000.  That means that the seller ends up with $194,000 for the house.

The sellers immediate reaction to paying buyers closing costs is almost always no.  No isn’t the right answer. Most home buyers ask sellers to pay closing costs. However buyers do not seem to always understand that the $6000 is coming off of the sellers bottom line and that the sellers end up with less money.

Buyers would have to offer more than the asking price so that the sellers end up with the amount they want for the home after they pay some of the buyers closing costs. Buyers think offering more than the asking price is absurd but that may be what they need to do if they want the house.

Buyers need to understand the math and be sensitive to the fact that this money does come off the sellers bottom line. Sellers need to understand that buyers will ask for help with the closing costs and that there is a huge chance that if they want to sell their house they will need to help.

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2 Replies to “Closing costs”

  1. Teresa, good simple explanation. The best way to deal with buyer and seller closing cost “issues” (what it is, why it is asked for, what to expect) is to discuss it at one of your first meetings with your client. My best defense is a well prepared, well informed buyer and seller. If you have given them the knowledge and expectation, you have already deflated the stress and anxiety.

    1. Teresa Boardman says:

      Agreed. I do coach my clients ahead of time so they know what to expect . . yet it can still be contentious.

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