Teri,

Excellent post! More and more people are needing help with closing costs and many lenders are starting to restrict the amount that seller can pay. Most have reduced it to 3% seller contribution.

Try the we have your home sold, but to make the deal happen, there needs to be (blank amount) from the deal put into the transaction to make it happen.  They will say, good...you put the (blank amount) out of your commission if it is such a bright idea.  You say, no sale, no one wins.  Most sales you can find $2000 or less in slack to make it happen or offer to buy the riding John Deere lawnmower and the wood splitter to make the deal happen!  Tell them they don't have to pay points/closing costs.  And they don't have to sell their home either if that is the attitude taken in many cases! Good post!

Good advice Teri, thanks for the information.

Teri,

In today's soft real estate market seller paying some or all of the buyer's closing costs can make the deal happen when it otherwise wouldn't. Many sellers need to be coached on this "marketing" idea. Many mortgage loan programs do allow this with certain limits.

In this market.  I think that it is could also be a good way to market your property to sell faster.  

Teri, netting it out to the "Net" does make life less complicated. If this were in a spreadsheet format you just change the numbers with the counters going back and forth and you see the new bottom line Net. This is just basic math but many Realtors are not on top of their game "financially" as you are. Good job!

It can be the thing to make the deal happen. Even when representing the buyer....I understand that when they just relocate here and do not have a bunch of money in hand....especially the military...that it is a nice thing to have a little extra money in hand when the transaction closes. With property staying on the market a little longer it may be something for the seller to consider....when wanting to sell....and make it happen.

Teri, very good and very true.  I always run the scenario of my sellers paying buyers costs in the net proceeds, and as you, send updates with every offer & counter.  I think I had to do 8 on my last deal!  It is very common in my market for sellers to pay buyers costs so I don't run into issues very often.

Teri, The seller paying for the buyers closing costs is normal in my market. I can't even remember the last time I did a deal where they didn't. The time to go over of this is at time of listing. In my market you can assume that the comps I use to arrive at market value have closing costs in the sales price. So my job is to make sure they understand this. If every thing is selling at $200,000 chances are $6,000 of that is buyer's closing costs.

The reality is they are not paying anything. The buyer is financing the costs into the loan. The only figure that should make any difference at tall to the seller is the NET. Anything above that line is just a manipulation of numbers.

Well done Teri.   

Teri  Here in Northern Virginia seller subsidies are just expected in our slow market regardless of the home price

Teri, like you said, the key is to explain the number to the sellers from the get go.  I have a friend who has had her house on the market for at least 6 months now.  There is an incentive to the buyer's agent, but not to the buyer.  She has been reducing her price, but in really small increments.  I will point her to your post.

Nice layout of how closing costs work Teri.  The seller paid closing costs can be a real advantage for sellers when competing for buyers.  Many sellers think they will wait until someone asks.  Those savvy sellers use this as a tool to get more showings and sell faster.  Nice post.

Teri, It's a wonderful idea to help them sell the home and certainly less then taking a price reduction if they don't.  I hope they take your expert advice.

Teri, In our area asking for closing costs has become a regular practice!! Great post as usual Teri.

Teri,

Well said, "so they can buy the house"...it's common in my area too.

Teri, it is happening more and more in my area. Once you show the sellers the net is the same, it is usually no problem. Only once and then the relatives got involved and said "TAKE IT"!

Very good post!  It is sometimes hard to get seller's to understand paying for a buyers closing cost but actually the price of the house usually goes up when the closing cost are wrapped in so they really receive the same. 

Teri - Having the seller contribute to a buyer's closing costs is an excellent tool in our current market. Wonderful post.

Teri, we didn't see any closing cost help around here for many years, and now it's becoming a lot more popular.  Most of the contracts I've written this year have some sort of seller credit.  Whatever works!

Mike--Thanks!! I think as we see required down payments rise, seller paid closing cost requests will be the norm.

Andrew--Great arguments but I don't think I will have to use...Sellers that scoff only do so at the time of the listing. I prepare them at that time for low offers and seller paids. Preparation is the key. IF they are told from the get-go to expect this, they are prepared for it. 

Eugene--Thank you...glad you enjoyed!

Esko--I posted this to educate potential sellers of the potential for offers to come in with this request. It is not something I put in my marketing because it is so common in our market, it gets lost. Once the sellers understand why buyers are asking for assistance, they are more than willing to assist to put the deal together.

Ryan--I have seen some people use but in our market is is more the norm than the exception. It is just important for sellers to understand the benefit. But you are correct in some markets, this could be a great marketing tool.

Gary--That spreadsheet would be a lifesaver in some negotiations. Keeping the net number straight is our job for the seller. Thanks for your comments.

Sally--It is so common in MN that sellers need to understand that it is a high probablility rather than possiblility. Sellers who have not purchased a home for many years are not aware of this trend. Educating the seller ahead of time makes it easier when that offer comes in.  

Joddie--When a seller sees the net number in writing, the don't often care about paying closing costs. But they can and do change with each counter and a good agent will keep on top of it to help the seller understand their final net number.

Bryant--I couldn't have said it better myself...That is exactly the situation and I explain to sellers upfront that almost every buyer will ask for closing costs to put a deal together. In most cases it doesn't cost the seller anything because the brokers usually agree for the commission to be based on the sale amount less the seller pds.

Karen--There is a similar situation here...That's why this is a post to the public explaining why a seller should pay them...From the comments, I think it becoming common in many communities across the US.

Rebecca--I think that incentives to the agents are overrated. The consumer is much to educated these days to buy a home that the agent likes...because the agent likes the bonus or commission. An incentive to the buyer would be more effective...Buyers care about that bottomline. If the funds are offered to the agent, there is less room to negotiate with the buyer.

Gary--I don't use it as a marketing tool because it is the norm in our market. I am starting to market that this home is not a "short sale" or "bank owned" because that is becoming a hot feature. I wrote the post to educate potential sellers as this is something that almost all buyers will need with the increased downpayment requirements we are seeing on loans. Thanks for the comments!

Carole--Sometimes it takes a little of both to put the deal together...Seller paid closing costs can be the difference between selling and not selling. So, a little education that it doesn't cost a seller anything will go a long way.

Mana--Thanks!! Pretty common around here too...That's why potential sellers need to understand the process shouldn't cost them anything.

Lynda--It is so simple isn't it? And it is very common all over from the looks of the comments.

Marchel--That used to be the case in MN--we could add the buyers closing costs into the price so a seller could get a full priced offer. But as the market has gotten softer, buyer's (and underwriter's) look at the original list price and do not want the selling price to exceed that number. In our current market, a full price offer is all but unheard of. Seller paids are no different than any other price negotiation. As long as the seller is happy with the net number, then it shouldn't matter if it came off the price or was a seller paid.

Sandra--It is not so much a tool in our area as an expectation...So education is key. Preparing sellers for an offer with the request makes negotiations go smoother.

Missy--I missed you in that comment chain....Sorry!

Your comment sounds a bit like "Deal or NO Deal!" Funny, I think our clients feel that same pressure these days! :)

Patricia--It's funny...It used to be only on VA or FHA buyers but then with the 0% down products it went away almost completely. Now seller pds are the norm in our area. Even buyers with conventional mortgages will ask for closing costs. They may be just barely scraping up the 20% down so need the closing costs paid by the seller to avoid PMI or higher interest. Another affect of the changed market.

"Seller's Concessions" have become commonplace in our area. You explain the practice well.

This is very common here also. Sometimes is the only way that its going to worK .

Teri, great post!  My wife and I are originally from SE Wisconsin and during one of our first Minnesota tarnsactions our sellers were asked to pay closings costs.  We thougt the buyers agent was nuts becuase in SE Wisconsin it was unheard of for sellers to pay closing costs.  Markets are different and here in Owatonna about 80% of our transactions now involve seller paid closing costs.  Thanks for the great explanation.

Teri - Great post, as always.  You've done a nice job of providing a complete explanation for sellers, yet kept it real understandable for them.  I know so many agents who stumble over this when trying to explain it to buyers and/or sellers.

I don't know how I missed this yesterday!

GREAT post Teri.  You did a beautiful job of explaining what we are seeing more and more of: sellers concessions.

I always tell my sellers to expect to see this on any purchase agreement and that we will always look at the "in your pocket at closing" amount so that they can determine based upon that if an offer is good for them.  

Rosario--Pretty common around here so I have some practice explaining!

Judi--Exactly! In many cases it is the only way a deal will work...That's why sellers need to understand from the get go!

Bartleys--My first transaction include seller paids before it was so common place! It makes sense if explained properly.

Lynn--You bring up a good point too...Many buyers do not understand that they are not giving a full price offer when asking for closing costs. This point needs to be explained to buyers fully so that when a seller negotiates, they understand that $5000-7000 is not like a coupon, it actually comes out of the seller's bottom line.

Kris--Thanks!! It is so important in our market for sellers to understand that many buyers will require closing costs to be paid. If explained at the beginning, it is easier to discuss details when the offer comes in.

My question is why are buyers looking at houses if they can't afford to pay closing cost.  Doesn't make any sense to me.  They should be saving up more money instead of wasting everyone's time looking at houses they can't afford to close on.  Just my two cents. 

Anonymous Commenter--Great question! Some buyers might have a down payment saved up but just not enough to buy. They do not waste a seller's time buy viewing a home and asking for closing costs. There are many more sellers out there in many markets than buyers. If a seller is willing to pay the closing costs and is happy with their net result, then it is a win-win situation.

Times are changing and I think that this will become more the norm - thanks for a good explanation of how the process works and why someone may need to consider this option.

Thanks for the great post! Any time I have to present an offer with sellers paying buyers closing costs I cringe because I know what's coming next. An irritated seller. As a newer real estate agent this is a very useful bit of information. Thanks Again!

Kathleen--Seller paid closing costs are very common in the Twin Cities. Almost all first time buyers request these funds.

Kisti--If you prepare the sellers for the possibility prior to receiving an offer, they are not surprised or upset by the request. Now armed with this explanation, you can have happier sellers and more win-win transactions!

Teri, you're so right. These days, almost every single buyer is asking the seller to pay his/her closing costs. It's still a buyer's market. When it was a seller's market, it was a completely different story. I prepare my sellers for the inevitability.

It's a normal occurrence here in Kentucky. I would venture to say that more than half of the offers I have had excepted had the closing costs are rolled in. I just cross my fingers that it appraises for that. If not, we make adjustments. 

Teri--Whatever works in this market....But what seems to work best is prepared sellers!

Lizette--Sounds like you are adding in closing costs. That worked a few years ago in MN but now it is off the top of the list price...not over it. Nailbiting if you were to add into the price as appraisers are being very cautious in this changed market!

Teri, this is a really good post. Your consumers are lucky that you keep them so well informed! Nice work!

Jeanean--Thank you for that kind comment! :) Just answering the questions that most buyers and sellers have in this changed market.