Sellers Should Pay Closing Costs Only When Buyer Needs It

Your buyers need to be more qualified, you are the seller not the bank. I guess if you had to you could take back paper but dont be out of pocket. Justin

J.P.:

Regardless of how a concession is negotiated, I have seen situations where the sellers concession was "added" to the purchase price, pushing the contract price above market value, leading to a major problem with the transaction.  IMO, concessions should be avoided if unnecessary.

In a Buyers market, let the Seller BEWARE...you want to sell, need to sell, have to sell, don't look a gift horse in the mouth...Consider any and all Offers, carefully..

I think you are being a little short-sighted and perhaps maybe sabotoging otherwise potentially viable deals.

First, the amount of downpayment by the buyer shouldn't even enter into the negotiations. All that should matter to a seller is whether or not the buyer is qualified (by way of a pre-approval letter) that s/he or they are finacially qualified and able to make the purchase.

Now, perhaps the buyers want to conserve as much capital as possible for possible home improvements. Or, maybe they want to make some investments. Or perhaps start a business. You don't really know what the buyer's intentions are. And unless you're very close to them, I doubt they will share with you their reasons why.

As for negotiating seller concessions or negotiating a reduced sales price - I can show you that it's in the best interest of both parties that the seller gets as high a price as possible and negotiate with the buyer that the seller pays the closing or settlement costs. And, perhaps they can contribute to a point or two for a reduction in the interest rate. It's a win-win for both parties.

You may want to rethink your strategy.

Everthing is a contract is subject to negotiation.  To second-guess the buyers' intent is counter-productive.  If it's a 3.5% FHA or a 20% down . . . who cares?  What difference would that make if the same buyer is asking for the same seller contributed closing costs.  It's still the same closing costs, right.  And if it's something the seller doesn't want to do, they can counter back.

"You can't propose a 20% down payment, ostensibly the mark of a strong, qualified buyer, then ask for help with closing costs and still expect to be viewed as a strong buyer. That tells them you don't have the money"

No it doesn't.  It just means the buyers have budgeted 20% down, an 80% loan, and they want seller closing costs. 

Personally, I don't think it necessarily comes across as a "gimme" to ask for concessions in this market, especially if full price or close to full price is offered on a home.  I hear what you're saying about NYC specifically, and agree that it would however be market-specific on how concessions are viewed..

Plain and simple, regardless of area and market, closing costs and other concessions are just part of the negotiating process. The sellers Net Proceeds should always be the most important part of the deal for the listing agent, and if they are getting what they want and the buyers are getting what they want, thats always a good deal.

I agree with a number of the other posts in this blog...seller paid concessions are part of the negotiations.  "Need" really has nothing to do with it.  You had a good buyer with 20% down.  Upon the seller raising the price, the buyer wanted to negotiate some seller paid concessions - makes perfect sense.  The net to the seller is really the bottom line.  I hope your seller received the highest "net" proceeds on the sale.

I've had the very same situation as you - the buyer added a request for concessions after agreeing to a higher price. The seller was not happy and waited for another offer. If the buyer's agent had explained the reasoning, maybe it would have worked.

I believe buying a house is like a car. You try and get the best deal you can. If you want to ask for closing cost paid there is nothing wrong with that. It is still the sellers perogative to say yes or no.

Who pays each of the various costs to close a transaction is negotiable. I start from the position that a seller needs to prove that they actually own the property that they are trying to sell so the cost of a title search would normally be paid by the seller. Likewise the seller should pay for a title insurance policy to provide some "guarantee" of clear title to the buyer. In my market convention is that the seller pays for the deed stamps (transfer tax) The costs associated with a mortgage should be paid by the buyer.  But all that stuff is negotiable. and I wouldnt read anything into it except that both parties want to get the best deal for themselves that they can

Phil In my area of NY most sellers are not crazy about the concession, now especially that values have dropped and appraisers are more conservative in their valuation.  In a  case with multiple bids the seller would more likely go for the one without the concession.  From my observation here, there are many regional differences in the transaction process.

This is what my sponsoring broker at Keller calls the "closed fist" of real estate sales.  I agree that this type of concession is not going over well with sellers.  I've had instances of buyers making this type of request.  It is a sympthom of the "vulture tendency" with respect to buyers right now - thinking they can steal a house - and one of the pieces of that puzzle in their mind is the closing costs.  At the end of the day it becomes an issue of whether or not there are other offers on the table.  If nothing else is out there and the market is glutted and the seller needs to sell, some sellers will find themselves backed into a corner.  At the end of the day - I think the seller needs to look at what they are taking away from the table - in every sense of the word.  There is of course the issue of whether the buyer would qualify when closing costs are on the table.  As for it being a "gimmie."  I'm seeing a ton of that from every quarter.  Heck, I've had people go 10 rounds over miniblinds.

I largely disagree with the original post, but in my  marketplace it's very common, almost expect, for a seller to give concessions.

To me, the bottom line is the bottom line. How you get there doesn't much matter as long as both parties are satisfied.