One thing that every buyer is going to ask for on an offer is the seller to pay closing costs or concessions. Depending on the price point of the house and the type of loan the buyer is asking for it is not uncommon for the buyer to ask the seller for seller assistance in their closing costs. In fact unless the buyer is paying cash for a house chances are they are going to ask for some help from the seller in covering some of the expenses associated with the mortgage.
In a market where FHA loans and low down payment loans are prevalent buyers are scrambling to get the necessary down payment together to get a mortgage and trying to leave a little room for moving and doing any personal touches to a house. Thus if they have saved the necessary down payment they are going to ask for some seller help in getting the closing costs paid in order to close on the house.
But what are closing costs? Closing costs are basically the fees associated with the buyer purchasing the house that the mortgage lender charges. Some fees are pretty fixed such as an appraisal, credit check, and attorney fees and usually do not fluctuate too much from lender to lender. The variable ones are the home owners insurance (which the buyer obtains) which is pre-paid for a year up front at closing. Another is the property taxes being escrowed into the mortgage so the mortgage company can pay them when the bill comes do as well as the mortgage insurance. The other fee is the loan origination fee which is what the lender charges to process the loan and give you the mortgage.
Are closing costs always the same? The direct answer to this is NO. Yes some of the fees are pretty standard and your Realtor should be able to figure out the monthly taxes and how much the lender is going to need to escrow. As well I recommend before any buyer puts an offer in on a house to get an insurance quote so we know what that fee will be. Then there is the inspections. Some will pay for them upfront and others roll it into the closing costs associated with the loan.
What if I do not use all the closing costs? There is an old adage that is poetic here. If you do not use it you lose it. So if you ask the seller for $5000.00 in closing costs and do not use the whole amount of money then you lose the portion that is not used and receive no credit back for it at closing on the price of the house. When the seller is negotiating the offer they are factoring in the sale price minus the closing costs; thus they have a net number they are looking at to walk away with. But according the contract it is UP TO that dollar amount. So if you do not need it all you do not get any of it back.
I always advise buyers and recommend that you do the same when buying a home; to ask a lot of questions. I will call the lender and ask them for a breakdown of their fees (if I do not deal with them on a regular basis) and estimate for the buyer and expected closing costs. One thing I do not want a buyer to do is leave money on the table when negotiating an offer….They work hard for their money and every little penny I save them can add up over the course of a 30 year mortgage. So, I will estimate the closing costs and usually ask for that amount minus $200.00. I tell the buyers it is better to have to come with a little extra then to have to give the seller a lot more.
I was prompted to write this because I was on the listing end of a transaction where the buyer asked for $4000.00 in closing costs but in the end only needed $2600.00. They were furious that they could not get a credit from the seller for the difference in the money. They wanted to know what they could add to the costs or have done to increase the amount so they could get all the money form the seller. Like I explained to the seller….They did not use it they lost it and you just gained $1400.00 that you did not figure on at closing. When we went to do our buyer end ironically we were short $258.00 on the closing costs form what we asked the seller for and had to come up with it. They then said now we understand why you did it that way. I said yes, I represent you and it is in my best interest to protect your interests and get you the most house for the least amount of money…..
So, if you are looking to buy a home and ready to make an offer in the Charlotte, NC. Area make sure to check to make sure you are not asking too much for closing costs and also to little…..It is your money after all.
Dave diCecco
Realtor/Broker
Helen Adams Realty
Cell: 704-519-7895
www.davedicecco.com
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