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Yes because I'm a disciplined real estate investor. It's not just $420 from commissions. It's additional closing costs paid on that $7000 as well as the taxes paid on that additional $7000. Further, for the buyer it's $7000 more in appreciation that they need for resale, more lending and title fees based on that $7000 and a higher property tax assessment.
It all adds up.
What additional closing costs does the seller have on the 7K? As for the buyer needed an additional 7K for resale that is very short sighted. They could invest that money and most likely earn way more than what they would pay on the mortgage.
I don't know how property tax assessments work where you live, but where I live it has zero to do with the purchase price of a house.
It seems that Buyers asking for help paying their closing costs is somewhat of a regional thing. It doesn't seem to be as common in this area as it seems to be in other areas around the country--at least by reading so many of these posts.
Personally, I would find it a bit objectionable if someone asked me to cover their closing costs. Hey--if you can't afford paying for your closing costs maybe you just shouldn't be buying the property. Of course, all things are negotiable so it's just another of the terms which need to be dealt with. But I think many buyers want to build in the "expectation" that the Sellers will pay part of the closing costs just so they can get a better deal.
Granted, a Seller could raise the price to cover any amount paid in closing costs (mindful that the need for an appraisal might complicate matters) but then it becomes just a game. There are enough games already in real estate; there should be no expectation that a Seller should pay for a Buyer's closing costs.
This seems like more emotion than anything else. Why do you care if a buyer "shouldn't be buying the property" as long as the deal closes?
As for the buyer wanted to "get a better deal", if the net is acceptable to the seller who cares? If the seller says I will be happy with an offer of 200K, they get the same 200K on a purchase price of 205K and paying 5K of closing costs. And if they care about the commission on the 5K just build that in to the net they would accept.
I've seen the HGTV shows where the buyers will ask the sellers to pay for closing costs. If the costs are $5,000, why wouldn't the buyers just ask for a $5,000 price reduction instead? Does it have something to do with the mortgage?
I've seen the HGTV shows where the buyers will ask the sellers to pay for closing costs. If the costs are $5,000, why wouldn't the buyers just ask for a $5,000 price reduction instead? Does it have something to do with the mortgage?
It has to do with cash. Generally a buyer is bringing a check to closing. This would reduce that.
Why do you care if a buyer "shouldn't be buying the property" as long as the deal closes?
The concern goes beyond my personal financial interests. It's more about being against trying to qualify people for mortgages when they perhaps should not be getting a mortgage. With lower down payments, there's more likelihood for foreclosures; there's more pressure towards artificial price inflation; and there's more likelihood of repeating the mortgage fiascos which we just went through. Not everyone should own a house with a mortgage.
Quote:
Originally Posted by manderly6
As for the buyer wanted to "get a better deal", if the net is acceptable to the seller who cares?
I think the main problem is that Buyers and many realtors try to give Sellers the impression that paying for closing costs is the standard way of doing business and that everyone expects closing costs to be paid, at least in part, by the Sellers. So Sellers begrudgingly "accept" a lower net offer since they feel they have no choice. When I sell property, I much prefer to deal with someone who has the financial ability to pay for the purchase. Doing so usually yields a better price.
Granted, I will do whatever it takes to close a deal, but I am not under any faulty impression that I need to pay closing costs or make other concessions in order to close a deal.
What additional closing costs does the seller have on the 7K? As for the buyer needed an additional 7K for resale that is very short sighted. They could invest that money and most likely earn way more than what they would pay on the mortgage.
I don't know how property tax assessments work where you live, but where I live it has zero to do with the purchase price of a house.
Why is it short sighted? I'm not quite sure how you don't understand this. Closing costs are a percentage of the sales price. If the house sells for $7000 less instead of paying $7000 toward the buyers closing costs, then you save whatever additional percentage of closing costs on the additional principal.
Tax assessments are supposed to be based on sales data and recent transfers. If the assessment is $7000 higher than what I paid, I have a legitimate argument to reduce my tax liability.
Why is it short sighted? I'm not quite sure how you don't understand this. Closing costs are a percentage of the sales price. If the house sells for $7000 less instead of paying $7000 toward the buyers closing costs, then you save whatever additional percentage of closing costs on the additional principal.
Tax assessments are supposed to be based on sales data and recent transfers. If the assessment is $7000 higher than what I paid, I have a legitimate argument to reduce my tax liability.
Short sighted because you can invest that money. And I'm asking you for specifics. Not just a "closing costs are a % of selling price". I'm asking you exactly what additional costs a seller would incur by having a 7K higher sales price. You also seem to be mixing buyers and sellers. My original comments were solely based on why a seller would care, not a buyer.
Assessments are definitely a regional thing. Where I live you can't use your own purchase price when trying to get a property tax reduction. It has to be based on other similar sales.
I think the main problem is that Buyers and many realtors try to give Sellers the impression that paying for closing costs is the standard way of doing business and that everyone expects closing costs to be paid, at least in part, by the Sellers. So Sellers begrudgingly "accept" a lower net offer since they feel they have no choice. When I sell property, I much prefer to deal with someone who has the financial ability to pay for the purchase. Doing so usually yields a better price.
Granted, I will do whatever it takes to close a deal, but I am not under any faulty impression that I need to pay closing costs or make other concessions in order to close a deal.
I don't understand why a seller would accept a lower net because they are paying for closing costs. That makes zero sense. Its no different if a buyer offered a lower purchase price. The seller either agrees or they don't. This is no different. Simply counter with a higher sales price that includes the closing costs.
It is regional as far as what closing costs are to the seller and what they are on the buyer's end.
From there it also seems to be popular in some areas for the buyer to make their offer with all or any combination of seller to pay all closing costs, to ask even for applicances that were not included to convey, to start with a low deposit, a further out date than that expected for settlement, a house sale contingency, a home warranty paid by the seller, etc.etc.
I've seen the HGTV shows where the buyers will ask the sellers to pay for closing costs. If the costs are $5,000, why wouldn't the buyers just ask for a $5,000 price reduction instead? Does it have something to do with the mortgage?
It has to do with the actual amount of cash one would have to bring to closing, with FHA and conventional loans the buyers have to bring either 3 or 3.5% of the purchase price to closing, add that to the costs of doing the loan and all the other closing costs and you could be talking pretty big money.
In Denver our companies average loan size is $232,000 with an average purchase price of $240,000 give or take, 3.5% of that is $8,400 add in $4,000-$5,000 in closing costs and escrows, and you are asking the average person to bring over $12,000 to closing. Lowering the price $5,000 will only drop the amount they need to bring to closing by about $300-$400.
While some can come up with the money, the average 1st time homebuyer or buyer who is buying on the lower end of the market either will not have access to that type of money, will have to cash out part of their retirement accounts, or even worse borrow the money. In Colorado the seller paying a fixed amount towards closing costs is pretty much the norm on low end homes, it helps them get buyers that can actually close, and it allows buyers who have the credit and stability to get into their starter homes.
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