Sellers are excited about being in the driver's seat again...yes, it is a sellers market in the Minneapolis/St Paul north metro again. When I do a market analysis on a home for a potential home seller, I give always net sheet of estimated of closing costs associated with closing the sale of the home.
One of the items on the list is “Seller contribution to the Buyer’s Closing Costs.” This particular cost doesn't sit well with most homeowners. Every now and again, a seller will verbally scoff and say something to the effect of, “My own closing costs are high enough. Why would I want to contribute to the BUYERS too?”
But even in this seller's market, the answer is quite simple: So they can BUY your house!
Today most buyers are required to put down a minimum of 3-5% of the purchase price of the home as a down payment. The closing costs for a buyer include title insurance, home owner’s insurance, appraisals, loan origination fees, name search fees, filing fees and more. As a REALTOR® in the communties throughout Anoka County and the north metro Twin Cities, I see these closing costs will run anywhere from $6000-$8000 for a first time buyer. Couple this amount with a required down payment and few buyers have the funds to purchase a home.
It's not just first time buyers that need the help either. Many move up buyers are getting out of their small starter homes that they purchased just before the housing market downturn. The market has recovered enough now that these families can break even at best. They don't have a huge down payment, but want to make the move up to a larger home so they often ask for closing cost assistance from the seller to make the deal work.
How does this work? Let’s say that a home is on the market for $200,000. The buyer writes their offer for $195,000 and their financial institution allows up to 3% seller’s assistance with fees and closing costs. They decide to ask the seller in their purchase agreement document for $5000, thus the net offer to the seller for the home is $190,000.
When an offer comes in on a home, it is sometimes confusing to sellers what the sale price versus net number is. In the case above, the $195,000 would be the sale’s price on the purchase agreement but by paying the $5000 in closing costs, the seller’s net number is really $190,000 less the seller's own closing costs including all fees and commission.
This is where the assistance of an experienced, professional REALTOR® comes into play. As a real estate agent, I provide my clients with a seller's net sheet that outlines all costs and fees that has been updated after receiving the offer. When counter offers start going back and forth, I reiterate at each step what my seller's net number to help eliminate the confusion.
Assisting a buyer with closing costs can be the ticket to getting your home even in a seller driven real estate market. Understanding the process is simple with the assistance of a knowledgable real estate agent!
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