Do Home Sellers Have To Pay Buyer's Closing Costs?
If you are thinking of selling your home, this might be one of your questions. The answer is simple. It's no. No home seller has to pay closing costs for a buyer if they do not want to. The less simple question might be to ask a home seller whether or not they actually want to pay a buyer's closing costs.
First of all, everything in a real estate transaction or contract is negotiable. All sales contracts for real estate have a space to designate the price, loan amount, down payment, etc. Then the body of the contract usually has a space to state the amount of closing costs that the buyer wants the seller to pay. This may be a percentage of the sales price or just a flat dollar amount. The amount of costs that a seller might be willing to pay will depend on what they need or want their bottom line number to be.
Currently I am working on a transaction where there are high HOA transfer fees to be paid by the buyer. Since the buyer is very low on cash and they need what they've got in savings to go for their down payment, we have asked the seller to pay the HOA fees. The seller immediately sent our first offer back and said "Nobody has ever paid my closing costs so I'm not paying theirs." Wow! That seems a little final doesn't it? She did come back with a number for the sales price. I don't think that her agent made it very clear about what we needed to accomplish. Let me explain using some imaginary numbers below.
Offer price: 200,000
Closing costs paid by seller: 5000
Seller's bottom line: 195000
Seems pretty simple to me and I bet it does to you too. Problem is that the seller in her anger about the closing costs just sent us a counter offer of $195,000. Same difference! The seller should only care about ONE THING!! The bottom line! That's it. Who really cares how it all is calculated. The buyer can't buy if the seller won't pay the costs. They simply do not have the cash on hand. In essence, the buyer is paying the costs in the form of a higher sales price and higher payment. When this was explained property to the seller, she was willing to take our first offer. She just wasn't thinking of it in terms of the bottom line. Once she did, it was worked out.
We all should be thinking about the common goal in any real estate transaction. That is to put a willing buyer and seller together to sell a property. Period. If things are explained to each of them in a sensible and easy way, it can usually be worked out. Many regions of the country have certain traditions and customs that do not apply in other areas. Closing costs being paid or not paid might be one of these customs. Be sure to ask your agent when buying or selling a home what the local custom is for the area you're buying or selling in. This will be helpful and then you will have a good understanding of what to expect. when an offer is made.
The other thing to consider when a buyer asks for closing costs to be paid is how much the closing costs will be. Depending on the loan program, the costs may be capped. A common cap for this can be 3%. Keep this in mind when building in costs for HOA transfer fees or other miscelaneous items. Lenders do this to prevent buyers from raising up sales prices to gain things that could be a problem if the buyer later defaults on a loan.
Example: property is really only worth $100,000. Buyer offers $110,000 to have seller pay all closing costs, HOA fees and carpet replacement. If the buyer defaults, the lender won't be able to sell that house for $110,000 if it is only worth 100K. They learned about this the hard way in the recent down sliding market. The lender wants the buyer to have some "skin in the game" so to speak. If they've invested more of their own hard earned money, they are less likely to walk away from the obligation of paying the mortgage. Kind of like a spoiled teenager who gets a brand new car and then wrecks it. They had no hard work and money invested in obtaining it so didn't care if something happened to the car.
To go back to our original question of "Do Home Sellers Have To Pay Buyer's Closing Costs," lets give a final answer. The real answer is no. They do not. However all sellers and their agents should keep an open mind and focus on the bottom line. Stay within the lender guidelines and structure the contract so that everyone gets what they want and need. I find that things just work better when that is the focus!
If you have questions about closing costs for buying or for selling a home. Sellers will want to begin with an analysis of the home's current value. Then we can discuss, line by line what the costs are to sell the home. For buyer's the costs are different. In all transactions there are some fixed costs, usually those set by local governments for recording fees or taxes. Other costs are dependent on the sales price of the property or are lender specific costs. I can help break those down and help make a plan. Feel free to contact me and we can get started.
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