It is amazing how many Borrowers I meet who are selling their home, and are surprised to find out they will not receive the full difference of the funds between the Selling Price, and what they still owe on the house at the Closing to put towards the purchase of their new home. It would be nice if this were the case, but unfortunately Seller's will incur Closing Costs on the sale of their property. So it is very important to make Sellers aware of these Closing Costs because Seller Closing Costs Can Be Substantial, and need to be discussed early in the selling process. However, many times I am the one who is informing them of these costs for the first time.
One of the first things I would expect a Listing Realtor/Agent to do when they meet with a Seller would be to do a "Net Sheet". This is what the Realtors I partner with do, so when s Borrower comes to me they already have a fairly clear idea of what they will profit from the sale of their house. Generally when this is not done it is because the Listing Realtor/Agent is a part-timer or someone who is not as knowledgeable as the Realtors I partner with.
The calculation I use as well as the Underwriters, is not the same as what a Realtor/Agent uses on their "Net Sheet" to figure the Net Profit from the property. The calculation I use is much simpler, but comes very close to what the Homeowners Net Profit will be.
The calculation I use as well as the Underwriters is as follows:
- Deduct 8% from the Selling Price. Included in the 8% are Realtor Commission, Attorney Fees, Conveyance Fees, Meter Reading, and any other customary Seller Closing Cost.
- Subtract the balance of the existing Mortgage from the remaining amount.
- Subtract Second Mortgages, Home Equities, Lines of Credit, and Liens.
- The remainder is the amount that will be available towards the purchase of the new home.
As I stated before the Listing Realtor/Agent's breakdown of what the Seller Closing Costs are expected to be, will be more accurate than the simple calculation I use. But at this point in the process we are not concerned with a detailed breakdown of the Closing Costs. At this point we are just concerned with making a CONSERVATIVE estimate of what the Seller's Closing Costs will be, so we can make sure there will be sufficient funds for the Borrower to close on their new property.
The conversation of what the expected available funds will be, needs to take place in my opinion, in the very first conversation the Realtor and Loan Originator has with the Seller/Borrower. As you can see from the above calculation Seller Closing Costs Can be Substantial, so it is very important to discuss these costs early in the selling process in order to eliminate any surprises later on.
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Info about the author:
George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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