Having a Buyer who is both Ready to buy the home you have found for them, and Willing to write up an offer to purchase that home... these are good things !
But in order to make the whole thing work... three things must be in place.
First... you must have a buyer, or pair of buyers who have good credit. These days... having good credit scores is more important than ever.
Second... you must have a buyer, or buyers, who have sufficient credit to support the mortgage payment. This is also a good thing !
But... Third... your buyer must have sufficient up-front cash to close... enough cash to bring to the closing table to cover their down payment (if any), their closing costs, and their prepaid items. This can often be a problem... especially for first-time buyers.
If numbers One and Two are there... decent credit, and sufficcient income... but the buyer cannot perform because of insufficient cash... then having the seller pay some, or perhaps all of the buyers closing costs and prepaids can turn a non buyer into an able buyer.
Many times when making an offer for my buyers... I have as part of the contract that the seller pay most of, or even all of (if the type mortgage allows that degree of "seller contributions") my buyer's prepaids and closing costs... I get read the riot act from the listing Realtor.
It goes something like: "I presented your offer to my seller, and they absolutely REFUSE to pay your buyer's closng costs. They feel it is not their responsibility to pay any of the buyer's costs. They said they had to pay their own costs when they bought, and that their buyers need to do the same."
Whew... nothing quite like a good "chewing out !"
There is nothing wrong whatsoever for a buyer... instead of making an offer that asks the seller to drop their price... to ask the seller to pay all of their closing costs... to make the sale work.
Buttom line... paying buyer's costs takes a willing buyer and makes them able to buy. Having a seller pay the buyer's closing costs and prepaids is something I always suggest to my sellers when I make my presentation to them on a listing. It usually works.
What do you think ? Would you recommend that your seller pay most of all of the buyer's closing costs to make the sale work ?
Karen Anne, good topic! In my area a seller paying closing costs and such is pretty much the norm. In fact, I believe only about 10% of my buyers last year did not ask for help in this regards. Because of this most sellers agents AND sellers are expecting to see this on any offer.
At listing time I go over this with my sellers and remind them that the bottom line to them is what we'll be looking at. All have been comfy with this as getting to the closing table is what they truly want.
Karen Anne, I agree with Kris in our market and even though we are both Michigan; I would refer to her...she is that far away but in this regard it is the same. I discuss it as well and I agree with you. I have yet for people to get upset they counter the percentage but they know in this market, it is common.
The ones that don't get the closing costs paid for are the bank owned properties that my clients have bid on and we were the offers they chose to work with in all those cases. Great topic!
I do think this might be another topic that depends on the market you work.
Karen Anne,
Been doing purchases here for years and can't think of a deal I did that did not have the seller pay most if not all closing cost. They are usually structured with an agreement on price then "bumping" up the amount that would match lender allowable closing cost.
Remember that you can still (who knows what happens at the end of March) do 100% FHA +6% CC with FHA
Happy Selling!
Tony Grego - Indiana Mortgage Broker
Karen Anne,
Been doing purchases here for years and can't think of a deal I did that did not have the seller pay most if not all closing cost. They are usually structured with an agreement on price then "bumping" up the amount that would match lender allowable closing cost.
Remember that you can still (who knows what happens at the end of March) do 100% FHA +6% CC with FHA
Happy Selling!
Tony Grego - Indiana Mortgage Broker
I think that if it will make the deal work, you need to at least mention it (and all options) to your seller, they can make the choice.
Your Friend in Charlottesville!
Jesse: There is a major difference between having the seller pay all the closing costs, and just taking that same amount off the price of the house. Depending on the buyer's situation, it can make all the difference in the world.
Just lowering the price... say $8,000... simply lowers a buyer's payment by perhaps $57 a month. But... having the seller pay that $8,000 of the buyer's closing costs enables that buyer to buy the house. One way... no sale... the second way... the sale "happens."
My friend... if you have not been taking advantage of this... you have been missing some great opportunities.
Ruthmarie: That is a very creative way to attack the problem. If there is an amount available that the seller would reduce the house by... doing what you did to solve your problem, or paying several points to do a two-one interest rate buydown... or pay closing costs for a cash-poor buyer... can make all the difference in the world.
Just think what a difference it might make if the seller paid $8,000 of the buyer's closing costs, and the buyer was able to keep that same amount... eight thousand dollars... in the bank as "reserves" just in case the buyer experienced a "crunch" sometime down the line.
Karen: Yes, sellers paying buyer's closing costs is something that is often done in many markets in the country. It really turned someone who cannot buy... into a buyer who can buy now !
Trying to get the seller to pay buyer's closing costs when the property is bank-owned, or then the sale is a short-sale, and the mortgage company has to approve the offer... I have never seen that happen. Banks want the price, and that is it. No closing costs, no repairs, no warranty service agreement... they just want a squeaky-clean deal. I think they shoot themselves in the foot demanding it that way... but... it is their home.
Karen Anne - I'm with you - If the seller will net as much or more accepting an offer that includes paying closing costs for the buyer as they would selling to another buyer at a lower sales price w/o paying any closing costs, I say go for it. I believe our job is to help our clients net as much as possible while selling their property as quickly as possible. Usually, the more creative we are, the better we serve our clients.
Best Wishes,
Kelsie