Special offer

What costs should a seller really pay?

By
Title Insurance with Bell Title /Triserv LLC

Technically?....Nothing except the pro-rated portion of the property taxes due and even that is not a requirement but more of a courtesy. There are no requirements at all for a seller to pay anything. Many aspects of a real estate transaction are routine for most experienced agents. However, for buyers and sellers, a purchase contract and the costs involved are not easily understood. The responsibility of a professional real estate agent is to help navigate the terms and costs associated with the transaction.

So let's say you have a contract and the seller has agreed to pay some of the costs to close the transaction (sometimes referred to as "seller concessions")....now what? What is considered customary? What is not? What should the seller pay and what should the buyer pay? This can be a dicey situation and sometimes can make the difference between a successful close or a negotiation that falls apart.

Since there are no hard and fast rules, here are a few things to know. Please keep in mind, this is not meant to be a substitute for legal advice. I recommend a qualified real estate expert to help with the contract and contract negotiation. Below is a short list of items that can be included to be paid by the seller of a property. It is usually limited to a specific dollar amount or a percentage of the final sales price. Again absent of any rules, the general rule for calculating closing costs is usually 2% of the purchase price. This is a good rule of thumb to determine if the charges are in line or not.

One of the great things about seller paid concessions is that it can be a tool for helping negotiate the purchase and or sale of a house. There does have to be enough equity to pay them and buyers should be aware that if there is financing, it is rolled into the final note and payment. However, it can help cash strapped buyers from shelling out more money after down payment and reserve requirements from the lender.

Some of the costs (non-recurring) that are allowed by lenders:

Title insurance

       Owners title insurance policy

       Lenders title insurance

Appraisal fees

Settlement fees

Search and abstract fees

Notary /Attorney fees

Courier fees

Wire fees

Odd days interest or accrued interest (amount of interest calculated from the day of closing to the end of the month 30 days before the 1st payment is due)

Origination fees

Prorated taxes (the amount of taxes due from the first of the year to the closing date)

 

Closing cost items (recurring) NOT allowed to be included in seller concessions by most lenders

Hazard insurance premiums

Property taxes set aside in an escrow reserve account with the lender for future payment

As always, stay sharp and keep looking out for the best interest of your clients!

Thanks for stopping by

 

To your success

 

 


LEADING EDGE TITLE SOLUTIONS

Matching experience with technology to give

you the edge to be a mortgage industry leader

 

Bo Hussung

Vice President of Sales

phone ~ 615-438-7300 fax ~ 678-261-1594

email me ~ bhussung@cogentca.com

web ~ www.cogentca.com


 

 

 

 

Richard Byron Smith, NMLS #184479
Mortgage Loan Officer, Fairway Independent Mortgage Corporation NMLS #2289 - Chattanooga, TN
Mortgage Loan Officer

Georgia's new sales contracts very specifically call for all closing costs to be paid by the buyer. In TN there are some seller costs, at least costs that are customarily treated as seller costs. It also seems to be fairly routine throughout TN, not just in Hamilton and neighboring counties.

Lenders typically let customary seller charges not count towards seller contributions.

Richard

Sep 24, 2008 01:47 PM
Richard Weisser
Richard Weisser Realty - Newnan, GA
Richard Weisser Retired Real Estate Professional

Bo...

In our area, sellers are expected to pay about 3% in closing costs. As funny as that sounds, it has been done so long that it is considered the norm. I have never understood why a seller is expected to pay for a buyers loan.

Sep 24, 2008 02:31 PM
Troy Jowers
Pogo Realty, LLC - New Orleans, LA
New Orleans Realtor

In Louisiana it is completely an open bargaining tool. I've written it both ways, where the seller takes on closing costs sometimes totalling 6% of the purchaser price as allowed by the lender, while I've also written where a buyer has agreed to pay sellers' costs in a tight multi-offer situation. And just as an aside to something Bo had in his post, we just closed a deal a week ago where the seller was allowed to reimburse a pre-paid hazard insurance premium that had been paid in full outside of closing by the buyer prior to the act of sale.

Sep 24, 2008 03:48 PM
Danny Thornton
R & D Art - Knoxville, TN
WordPress Guru

Bo, in every home that I have ever bought, I have never paid my closing cost. Not even one red cent to it. I have always negotiated it into the contract where I am covered.

Sep 24, 2008 03:53 PM
TeamCHI - Complete Home Inspections, Inc.
Complete Home Inspections, Inc. - Brentwood, TN
Home Inspectons - Nashville, TN area - 615.661.029

Interesting, Bo. As it has been 30 years or more since I purchased a house, I do not know the answer to this question. Gotta find someone with a bigger brain than mine...

Sep 24, 2008 08:44 PM
Bo Hussung
Bell Title /Triserv LLC - Nashvle, TN

Richard S., thank for the information...Bo

Richard W., 3% is a good benchmark. Thanks....Bo

Troy, thanks for the state info for Louisiana and the side note. It just goes o show that there are many necotiatiing tolls to sell and/or purchase a house. My opinion, if either side wants it bad enough (which is usually the case) they will figure it out.....Bo

Danny, that is a good tact and I am sure the seller came out okay on every single deal.....Thanks.... Bo

Michael, don't worry, I feel the same. Congrats on your house being paid for......Bo

 

Sep 27, 2008 02:41 AM