The disadvantages of seller concessions are that the monthly mortgage payment is increased as a result of “paying more” for the house. Also, by avoiding banks and other lenders, homebuyers might also pay fewer fees and less in closing costs. In addition to closing costs, keep in mind that as a seller, you may end up paying for additional costs, including: Loan prepayment fee: Depending on the terms of the mortgage you’ll be paying off, you’ll want to watch out for a prepayment penalty. Do they actually pay those fees out of their pocket? Costs can vary depending on the lender and loan program you decide to use. (function() { Living in Eugene, Oregon | Bethel Area Neighborhood Tour, Living in Eugene, Oregon: Churchill Area Neighborhood Tour, Living in Eugene, Oregon: Southeast Neighborhood Tour. So we don't discuss it much. We know they want to sell bad. Do they actually pay those fees out of their pocket? All set. If inventory is low, you may need to offer over the asking price of the home to get your offer accepted. Hope that clears things up! Lets start with some basic information. We made on offer for $427. Hi everyone, welcome back to my channel. Adding the request for closing costs on top of that can present challenges. What, exactly, are closing costs? If the property doesn’t appraise for the full, $275,000 purchase price then the mortgage company won’t finance the full amount. Closing costs for sellers of real estate vary according to where you live, but as the seller you can expect to pay anywhere from 6% to 10% of the home's sales price in closing costs at settlement. Accordingly, if you take out a loan for $100,000 you could owe around $3,000 in closing costs alone. So don't be fooled: You can't sneak closing costs past a seller, any more than someone could sneak them by you. // ]]>, Heisler & Mattson Properties182 Turnpike Road, STE 209, Please enable Javascript to comment on this blog. So instead of having to take $5000 out of your checking account to pay those closing costs, you can roll it into the mortgage, for about $25/month for the next 30 years. Depending on the situation, this can be a win-win for both sides of the transaction. Closing costs for sellers revolve around transferring ownership of the property, verifying their title, and paying off their outstanding balances. Some types of loans require that you pay a percentage toward your closing costs, but in most cases, lenders allow the seller to foot the entire bill. As a seller, you have the option of paying the buyer's closing costs if you want to. I'm Bryn Cook and I'm a real estate agent here in Eugene, OR. Seller contributions toward closing costs, in reality, is a way for the buyer to work the fees into the mortgage loan. If you add closing costs to your home loan, your lender might raise your interest rate. So instead of having to take $5000 out of your checking account to pay those closing costs, you can roll it into the mortgage, for about $25/month for the next 30 years. An experienced real estate agent, tax advisor, or attorney is a seller’s best bet when it comes to getting an accurate idea of how much they’ll pay in closing costs. My firm, and many others, don't charge commission on closing costs due the buyer, so the additional cost there is zero. Today we’re going to discuss a couple of disadvantages of the sellers paying for your closing costs when purchasing a new home. They can do basic math. var cx = '014918532159340919144:cjmkbjmbf34'; Answer: The buyer. Just expect the seller to counteroffer with a higher home purchase price of … In real-estate parlance, It's done at the close. Short sale may take 45-90 days to close. So if the seller isn't out any dough, who paid for the closing costs? o how does it work when you ask the seller to ‘pay’ for those costs on your behalf? Now that we know what they are, let's talk about when they happen. Lender may not approve price, seller concessions or closing cost credits. Don’t forget to watch the other videos in my series about the home buying process in general. Closing costs are added to what the buyer is paying for the house, and it's all laid out on the HUD, which is the official counting of the transaction. I work hard to stay connected. They countered with $455. [CDATA[ (Remember: if Joe Buyer is buying the home for $300,000 with $3,000 in concessions it means that he could buy the house for $297,000 with zero concessions). Put another way, let's say the seller has two offers: One is at 300K, but he doesn't have to pay closing costs, the other is at 303K, but he has to pay 5K in closing costs, and other than that the deals are equal. Or did they? The bigger loan is due to extra cash going towards closing costs, rather than down payment. He markets the home at $310,000, and he gets an offer right away (because he listed with me...) at $300,000. var s = document.getElementsByTagName('script')[0]; I hope you found this information helpful and have a better understanding of the disadvantages of asking for the seller to pay closing costs. We're going to keep this simple for this transaction. I'll say again: the buyer ALWAYS pays closing costs. This post is long overdue. The total closing costs that a seller will pay will depend on negotiation, the market, the home’s price, and what concessions the seller offers. You’re pre-approved with your lender for up to a $275,000 purchase price and you really love this house. So how does it work when you ask the seller to ‘pay’ for those costs on your behalf? See, that was easy, the seller just paid for your closing costs! Real Estate Contracts and Escalation Clauses, Spring Real Estate Newsletter 2020 Heisler & Mattson Properties, Milford, MA Home Sales and Real Estate Market Report (May 2020). Yes, the seller occurs expenses, but they are pretty nominal. When selling a 300-600K house, $13 isn't a big deal. Let’s go back to the $250,000 list price scenario, but now there are multiple offers on the table and you need to compete. Your article is nice, but it, like others written on the subject, fully ignore the additional costs to the seller if the seller accepts a higher offer price and pays for closing. The seller pays them, but really, the bank is letting you borrow "extra" to pay the bank's own closing costs. Seller Pays Closings Costs: An End to the Myth of Free Money. What should we do about closing costs? You decide to go big and offer the full $275,000 that you are approved for and request that the seller pays $5,000 towards your closing costs, netting the seller $270,000. Bottom line: Paying off your closing costs over time rather than up front might not save you that much money. When bidding on a home, you can offer $350,000 and request $3,000 in concessions to cover some of your closing costs. Which do you think he takes? As you can see, there are a lot of disadvantages of a seller paying closing costs. rate of 4.5% to pay both agents) would be $18,000. s.parentNode.insertBefore(gcse, s); Misc. Closing costs happen when the home is exchanged and title is handed over. Seller's aren't dumb. It's probably one of the top questions I get from both buyers and sellers, both of whom think some sort of enormous advantage (or disadvantage) is to be had with this little trickery. A tip to negotiating for the seller to pay closing costs is to offer to purchase the home for a higher amount if they agree to pay a certain amount of your closing costs. We are willing to lose this deal, but would prefer not to. In real estate, a seller concession is a specified amount or percentage the seller is willing to pay on behalf of the buyer to assist in the buyer's closing costs. You can always pay it down later, but  when cash is tight, this is usually the way to go. Average closing cost is about $3000. Making the … var gcse = document.createElement('script'); gcse.type = 'text/javascript'; Matt Heisler, //