Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
It completely depends on your area. I recently purchased a house and in this area some closing costs in the current market conditions are normal. However, those costs weren't paid directly by the seller. what I mean is they didn't bring a check to closing. They are wrapped up into my mortgage.
Say the house is $160 and the seller agrees to pay $5 in closing costs. So you're paying $165. Your mortgage is for $165 and not $160. The sellers will net $160 at closing.
Make sense?
Call it whatever you want, but understand that the seller can reject your offer or counter it. They don't have to play along.
I think there are many inexperienced buyers these days still looking for bargains and thinning sellers will bend over backwards with closing cost.
Like the other poster said, the majority of "closing cost" the buyer incurs is usually with escrow of property taxes, HOA, Insurance.
To me this "closing cost escrow" confuses the heck of of inexperienced buyers. Escrow is escrow and depending what time year u end up selling the home when it's your turn, you may get back most of that escrow money.
I sold a home 3 months ago and the only concession I gave the buyer was a $600 home warranty. Sellers already are responsible for paying 4-6% commission. In Florida where I live we pay it seems 2/3 of the transfer taxes/title and the buyers only pay about 1/3. The rest of the "closing cost" like mentioned above is really just real estate taxes insurance that's added to fund your initial escrow.
When I purchased a home 3 months ago as buyer the house was price well (actually did not use an agent). But I didn't ask for seller contribution either.
That's the bottom line. What is the sellers net out of all of time.
Each market is different in terms of who pays what.
I think there are many inexperienced buyers these days still looking for bargains and thinning sellers will bend over backwards with closing cost.
Like the other poster said, the majority of "closing cost" the buyer incurs is usually with escrow of property taxes, HOA, Insurance.
To me this "closing cost escrow" confuses the heck of of inexperienced buyers. Escrow is escrow and depending what time year u end up selling the home when it's your turn, you may get back most of that escrow money.
I sold a home 3 months ago and the only concession I gave the buyer was a $600 home warranty. Sellers already are responsible for paying 4-6% commission. In Florida where I live we pay it seems 2/3 of the transfer taxes/title and the buyers only pay about 1/3. The rest of the "closing cost" like mentioned above is really just real estate taxes insurance that's added to fund your initial escrow.
When I purchased a home 3 months ago as buyer the house was price well (actually did not use an agent). But I didn't ask for seller contribution either.
That's the bottom line. What is the sellers net out of all of time.
Each market is different in terms of who pays what.
Inexperienced buyers, in my opinion, really need to have a real estate lawyer negotiate and write the contract for them as they have financial interest in the outcome, as well as knowing the local regulations.
You can go to aimloan.com and get a quick loan estimate with closing costs (and see how much price gouging the local lender is doing). No need to register or identify yourself. Seller usually pays the larger title policy which might be around $3000 for you. Buyer pays the smaller title fee, around $600 maybe. Buyer usually pays for survey, around $400, and also for appraisal. Of course you have your down payment. You might want to look into prepaid PMI also, which might cost you another 2%. And you have your escrow. And possibly points. Then you can add $x,000 onto your offer and ask seller to pay $x,000 at closing time (basically financing some of your closing costs). And yes, you can also ask seller to pay $y,000 of buyers closing costs. Buyer makes the 1st offer, and usually shoots for the moon.
... its all negotiable. "if you don't ask, you won't get" are words I go by. You'll get one of 3 replies - yes, no or counter. (Keep in mind that someone else could be on the fence with the property and cc could be a determining factor whether you end up with the house or not).
... its all negotiable. "if you don't ask, you won't get" are words I go by. You'll get one of 3 replies - yes, no or counter. (Keep in mind that someone else could be on the fence with the property and cc could be a determining factor whether you end up with the house or not).
Good point in possibility of losing the house completely with a lower offer. When my daughter sold her house a few years ago (before the housing crash), she got about a dozen offers the first day it was on the market. She (and hubby) didn't consider any that weren't ABOVE the asking price. I think the one they accepted was about $10K more than their asking price.
You can go to aimloan.com and get a quick loan estimate with closing costs (and see how much price gouging the local lender is doing). No need to register or identify yourself. Seller usually pays the larger title policy which might be around $3000 for you. Buyer pays the smaller title fee, around $600 maybe. Buyer usually pays for survey, around $400, and also for appraisal. Of course you have your down payment. You might want to look into prepaid PMI also, which might cost you another 2%. And you have your escrow. And possibly points. Then you can add $x,000 onto your offer and ask seller to pay $x,000 at closing time (basically financing some of your closing costs). And yes, you can also ask seller to pay $y,000 of buyers closing costs. Buyer makes the 1st offer, and usually shoots for the moon.
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.
First of all, the fact that the Seller is losing money on the sale should have no bearing on your offer. If the property isn't worth the list price, you shouldn't pay it regardless. You--with the help of your broker via comps--will need to determine how much to offer.
You will also need to determine the composition of the closing costs. 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.)
As for asking the Seller to pay closing costs vs. reducing your offer: My recommendation would be to reduce your offer. Although the net to the Seller is the same, I think many Sellers simply find it objectionable to pay closing costs which are rightfully the obligation of the Buyer. That's not particularly "fair". Accepting a lower price based on market value; well, that's a bit more tolerable because it's the market dictating the price.
Of course, your only concern is whether others might jump in and buy the house for more. That's the dilemma with negotiations. Your best negotiations are done when you're truly willing to walk away from a deal. Good luck.
EDIT: And don't forget that by making a cash offer you will have the advantage over offers contingent on financing! The speed and certainty of a cash offer can trump even higher offers that require a mortgage loan.
Last edited by jackmichigan; 11-03-2012 at 04:00 AM..
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
