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Thank you all VERY much, especially Jack - your statement really helps me think about the issue in a way that is allowing me to find clarity. I will be making the offer this morning. Wish me luck!
Assuming there are no appraisal issues, all the seller should care about is the net amount they will get. If their bottom line is 400K, it shouldn't matter if that is a straight 400K offer with no closing costs or 410K and paying 10K of closing costs. The check they get will look the same.
Quote:
Originally Posted by FalconheadWest
Sellers NEVER pay closing costs. The buyer finances the closing costs into their loan which in turn increases the sales price they could have bought the house for.
Ditto and Ditto.
Quote:
Originally Posted by Minier
Ah, that does make sense. We're doing a cash deal - maybe that's why the issue is not as clear in our case: no mortgage/ loan involved.
It is a net amount game, and you shouldn't worry whether you pay $400,000 and get $10,000 in CC or pay $390,000. The net to you and the seller is basically* the same.
Quote:
Originally Posted by ACWhite
The OP stated that it is a cash deal. So a lot of what you talk about (e.g., PMI, points, lenders' title insurance, appraisal) does not apply. If the OP wants a title policy to protect him/herself (which s/he should) s/he can request it. With a good agent s/he should not need an appraisal.
OP, the key is to know whether the price of the house is comparable to that of other houses that have sold recently and what the typical practice is in that neighborhood area with respect to closing costs. If sellers typically pay $3000 toward those costs, for example, you can reduce the comparables' prices by $3000 to get an idea of what you should pay for the house you are bidding on if you don't ask for closing costs in your deal. If the house is as well-priced as your agent says it is (and it may or may not be--s/he should have the comps. to show you) the seller likely will not agree to further discounts or covering the closing costs because s/he can get another offer that is better. So, it doesn't matter what the asking price was. All that matters is the market price.
Good post.
OP,
It is easy to bump into fear and loathing and superstition regarding seller paying buyer closing costs. Some sellers will keep the home out of principal and sell for a significantly lower net proceeds because of financial superstition that there is something sinister about buyer financing closing costs in the mortgage via seller "paying" them.
To structure the contract well, as AC says, focus on market value.
I see no reason to irritate a possibly superstitious seller with a CC request in a cash deal. You are going to write one check pretty much for the same amount either way.
*An offer including CC assistance is a higher amount from the buyer, including inflated costs with a higher transfer tax and higher agent commissions due to the increased sales price. If you don't need the CC money, and $10,000 seems very high, why mess with it?
Do you know how much the annual taxes are for the property--and do they constitute a major portion of the closing costs? If the annual taxes are extraordinarily high, will that have an impact on your decision? (Remember, you'll need to pay those year after year, unless you can get them reduced through appeal.)
If you can't afford the annual property taxes on a home, regardless of who's paying the closing costs, you need to find a different house.
I've never had anyone pay my closing costs (I've purchased 4 properties in my life) and I am NOT going to pay any one's closing costs. In my opinion, that is the responsibility of the buyer. Too much HGTV as another poster mentioned.
You watch those kinds of shows, and they people's eyes light up when they see granite counter tops...but the countertops are on top of 20 year old cabinets, but "Geesh, it's GRANITE!". My eyes usually roll back in my head...
I've never had anyone pay my closing costs (I've purchased 4 properties in my life) and I am NOT going to pay any one's closing costs. In my opinion, that is the responsibility of the buyer. Too much HGTV as another poster mentioned.
You watch those kinds of shows, and they people's eyes light up when they see granite counter tops...but the countertops are on top of 20 year old cabinets, but "Geesh, it's GRANITE!". My eyes usually roll back in my head...
again I say....
So which offer would you take on your home listed for $200k assuming borrowers and offers are identical in all ways except varibles below:
buyer A-
$190,000 offer
no seller paid closing costs
or
buyer B-
$200,000 offer
seller to pay $5k of toward buyer's closing costs and prepaid items
Would you short yourself $5k just out of principal?
You watch those kinds of shows, and they people's eyes light up when they see granite counter tops...but the countertops are on top of 20 year old cabinets, but "Geesh, it's GRANITE!". My eyes usually roll back in my head...
I've never understood this either! Glad to know I'm not the only one.
in my area, most sellers are anticipating a buyer asking for closing costs (typically sliding from 3.25%-2.5% as price increases)
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