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Say that you are selling a house that's been listed for several months with no offers. A prospective buyer offers you 2 alternatives:
(1) I will pay $300k and all my own closing costs
(2) I will pay $307k and seller will pay $5k of my closing costs
Please assume that the exact numbers would be worked out so that the seller really does do a bit better paying closing costs than not (i.e. after all commissions, fees, etc.).
The buyer has great credit, a very secure job, etc., and is pre-qualified at the higher selling price. She would prefer the slightly higher mortgage with slightly less cash needed at closing. Assuming the seller would also net slightly more with that option, would most sellers go for it? Or would sellers be annoyed at paying some of the buyer's closing costs and just on principle take the offer that nets them a bit less?
(In my state [maybe in all states?] sellers can pay up to 3% toward buyer's closing costs.)
In my opinion only a crazy buyer would offer more money like that. The seller cares about the net. Don't give them more money in order to wrap your closing costs into a loan. 95% of my real estate transactions in 2011 had the seller paying the closing costs on behalf of the buyer.
Closing cost allowance is determined by the type of loan, not the state. Please tell me you have a very experienced real estate agent and lender helping you out?
There is no reason to not pay costs, particularly when you will realize a higher net at closing, but know that the property has to appraise at the higher value.
In my opinion only a crazy buyer would offer more money like that. The seller cares about the net. Don't give them more money in order to wrap your closing costs into a loan. 95% of my real estate transactions in 2011 had the seller paying the closing costs on behalf of the buyer.
Closing cost allowance is determined by the type of loan, not the state. Please tell me you have a very experienced real estate agent and lender helping you out?
I read that the OP is the seller, and interpret the $300K as a lower amount.
Assuming that all the other terms of the contract are the same it really doesn't make that much difference since you are only talking about a $2000 here. I think if these are good offers the seller will tell you they are happy to see either one of them and make your choice.
If these were 2 offers coming from 2 different buyers and I were the seller I might consider doing a multiple counter.
A prospective buyer offers you 2 alternatives:
...Assuming the seller would also net slightly more with that option, would most sellers go for it?
...Or would sellers be annoyed at paying some of the buyer's closing costs and just on principle take the offer that nets them a bit less?
So long as laws aren't broken... it's all about the bottom line. How you get there, which still includes a valuation for contingencies and time until closing date among other things, is largely immaterial.
But $1000 one way or another shouldn't be a factor in a $300,000 transaction
Silverfall and MikeJaquish, I'm actually the buyer in this one, trying to figure out what a seller might go for. :-) The numbers are all hypothetical -- they don't actually relate to the situation that might come to pass. It does seem odd to me that the buyer might get cash at closing (legally) but if it could work out, that would be great. I DO have down payment money AND reserves AND I have a job that I can only lose through gross negligence (so it's not going to happen!), but it would be nice to be able to keep a few thousand dollars liquid.
I'll be paying extra on the mortgage every month anyway (as I do with my current mortgage), so the few extra thousand on the mortgage would be "made up" relatively quickly.
Thanks for all the replies!
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