Nov. 25, 2005: Seller's paying of closing costs could be a win-win situation for first-time home buyers
I wrote a purchase contract recently with the seller paying closing costs, my first one in months.
Getting the seller to pay the buyer's non-recurring costs - pre-paid interest, tax and insurance impounds, etc. - is a nice way to discount a house. Lenders will allow 2 to 3 percent in seller-paid costs on a conventional loan. The buyer pays less cash out of pocket - possibly nothing on 100 percent financing - with the seller paying the costs out of the proceeds. The buyer's monthly loan payment may be a little higher, but this is a negligible expense compared with hanging onto more cash at closing.
This is actually a very common contract provision, but we haven't been able to do it much lately. In the heat of the sellers' market, buyers' agents were making calls like this before writing an offer: "I'm about to write on 12345 W. Mulberry Street, but I wanted to discuss a few things. First, can you tell me how much over list price we'll have to go to stand a chance? And of course we'll be waiving the appraisal and repairs. Do your sellers have a specific closing date in mind? And what title company do you prefer? Finally, what kind of gourmet chocolates does everybody like?"
This was a hard way to work, but a counteroffer is a rejection. The goal was to get the house under contract as written because you could lose it in the time it took to get a counter signed.
Things are a little easier now, which is why we can go for costs with the right home. If the house has been on the market a little too long, you can help the seller save face by offering full price at the front door while taking a backdoor discount with the closing costs. If the home is offered at less than market value (and it can happen), you can offer over full price, taking that premium back in costs.
This is a win-win negotiation, and the buyers have a little money left to take to the home-improvement store.
Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.
Spread the word: Click here for a printer-ready version of this column.
Or: Steal this book: I've written over 200 of these real estate columns. They are consistently one of the most popular features on our blogs. Many of them are dated and/or entirely Phoenixocentric. But many others are timeless and generic. If you want to use any of my columns on your weblog or web site, feel free. Three rules: Don't change my text, credit me as the author and give me a link back to http://www.bloodhoundrealty.com/ with appropriate anchor text. Something like this, perhaps:
Am I link-baiting? You bet. The quid pro quo is free content for your site that pulls eyeballs and excites interest.<a href="http://www.bloodhoundrealty.com/" target="_blank"> Phoenix Realtor Greg Swann</a> suggested I share this with you:
