By: Joe Petrowsky in CT - Refer to his original post to comment.
Closing Cost. Who pays? Typical in Texas is:
Seller has their closing cost like brokerage fee (approximately 3-7% of sales price, depending on agreement with listing broker and/or buyer's broker) and then title policy is common (negotiable between buyer and seller and less than 1% of sales price, but is commonly a seller expense) and then they usually have escrow fee, doc prep fee and a few other county filing and miscellaneous fees.
Buyer usually has the cost associated with their loan like the loan origination fee (approximately 1-2% of the loan amount), their title fees (many of the title fees are split in half between a buyer and seller in a Texas contract) and then the buyer usually has to pay insurance for 1 year and usually put some taxes in escrow. Survey is negotiated between a buyer and seller. Appraisal is loan-related and usually a buyer expense.
It's common, however, for the buyer to have down payment (generally 3-20% of purchase price) in reserves to buy a home, but to need help with their closing cost. Help can come in many fashions, but what is super common is for the seller to pay the buyer's closing cost. In about 3/5 to 3/4 of the deals in Texas in the more economical priced homes (especially FHA and VA home loans) and it's even common in the $200s $300s and $400s home sales to include seller paid buyer closing cost. It becomes less common the higher priced the home, in my market.
Point is, it's common. Knowing HOW common can help a negotiation. When I pull sales comps for buyers and sellers, I do not pull sales prices alone. Nor do I solely focus on size, number of bedrooms, number of anything physical to the home... you also have to look at days on market, and, you guessed it, how common is it within the comparable sold homes is it that the seller helped the buyer with closing cost? I think that sets realistic expectations for the seller or buyer to pull those figures.
“Berated by Real Estate Agent for Suggesting the Seller Pay Closing Costs”
I did a preapproval recently for a veteran. He came back from Afghanistan and immediately went back to the job that he left prior to being deployed.
One of his goals upon return was to purchase a home for his family. Even though he was well qualified, he had very little in the way of savings.
We went over a comfortable monthly payment, which was near what was being paid for rent. He told me that his mom had given the name of a real estate agent that was working part time, but he felt obligated.
I did a preapproval for him and included that they were looking for the seller to pay for closing costs and also referred a home inspector, attorney and insurance agent.
The following day I got a call from his real estate agent, asking me what right I had to put into a preapproval that this buyer wanted to have the seller to pay the closing costs. I probably would have talked the issue through with her, but when she said that guys like me caused the entire subprime fiasco.
I told her, I didn’t realize that I had that much power, which totally put her over the edge. Not sure what else she said as she was hanging up on me.
I got a call from my client shortly thereafter asking me for a Realtor referral. He told me that the real estate agent went off on him, after she got off the phone with me. I’m sure that conversation didn’t last long.
The issue of seller paid closing costs has been around forever. Market conditions and area will dictate what is possible. Is it always possible, absolutely not, but my preapproval has to be based on the needs of the buyer/borrower.
image courtesy of arztsamui/freedigitalphotos.net
Joe Petrowsky, NMLS #6869
Right Trac Financial Group, Inc. NMLS #2709
110 Main St.
Manchester, Ct. 06042
Office: 860 647-7701 x116
Fax: 860 647-8940
Cell: 860 836-9294
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