Seller Paid Closing Costs Continue To Be An Advantage To Buyers

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149
https://activerain.com/droplet/4L4L

In Connecticut as in still many other parts of the country, we continue to be in a Buyers Market and as a result Seller Paid Closing Costs Continue To Be An Advantage To Buyers.  However, even though Seller Paid Closing cost tend to be mainly thought of as an advantage to Buyers,  Seller Paid Closing Costs are also an advantage to Sellers as well.

Seller Paid Closing Costs, can be a tool and an advantage for both Sellers and Buyers in several ways, but for the purpose of this blog I will stick to just a few of the main reasons.

What Are The Advantages Of Seller Paid Closing Costs For Buyers?

Buyers, especially First Time Homebuyers many times have very little money for both the Down Payment and Closing Costs.  Even those who do, will generally be left with very little or no money if they pay for both the Down Payment and the Closing Costs.  If the Buyers are First Time Homebuyers they might be able to qualify for a State Bonded Mortgage Program, like our Connecticut Housing Finance Authority (CHFA) program which will allow them to borrow the Down Payment and Closing Costs. Also if they are Veterans, or purchasing in a town that is eligible for USDA Mortgages, these program can solve part of the problem as well.  However, these programs are tougher to qualify for than a regular FHA, or Conventional Loan, and the Borrower(s) might not meet the requirements.  This is where Seller Paid Closing Costs can be a huge help.

By getting the Seller to agree to contribute towards the Closing Costs, whether in part or the total, the Buyer is now able to purchase the home and retain some money.  This will enable the Buyer to either make improvements to the property, or just simply have a little money in reserve to be able to take care of unexpected emergencies.  Having a little bit of money left in the bank can be the difference between being able to pay the mortgage, or going into default if an emergency arises.

What Are The Advantages Of Seller Paid Closing Costs For Sellers?

Sellers need as large a pool of Buyers as they can possibly get.  By increasing the pool of Buyers available to purchase their property, they increase their chances for multiple offers on the property, and getting the highest selling price for their house.  Being willing to consider paying some or all of the Buyers Closing Costs increases the pool of Buyers who might not be able to purchase the property otherwise. 

Those of us who have been in the business for a while know very well that in reality the Seller really does not pay the Buyers Closing Cost.  What really happens is the Seller provides the Buyer with an avenue to finance the Closing Cost.  For example the price the Seller was willing to sell the house at is increased by the amount of the Closing Costs the Seller is agreeing to contribute.  Therefore, the Sellers almost nets the same amount they had originally agreed to sell the property for, and the Buyer is able to purchase a property they may not have been able to without this assistance.

Seller Paid Closing Costs are a win, win for both the Buyer and the Seller.  The danger of course is the possibility of the property not appraising high enough to be able to cover the Closing Costs.  However, if the Listing Realtor did the proper job of pricing the property at a price which is supported by other comparable sales, then this should not be much of a concern.  If the Realtor took an overpriced listing, then Huston We Have A Problem.

I could provide more reasons for why Seller Paid Closing Costs Continue To Be An Advantage To Buyers and Sellers, but I thing the above reasons are enough to show why Seller Paid Closing Costs are an advantage to both Buyers and Sellers.

 

 

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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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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who is licensed in #CT, #RI, #MA, #NH, & #FL and can assist you with all your #FHA, #Conventional, #VA, #USDA, and #State Bonded Progam #mortgage needs in #CT, #RI, #MA, #NH, & #FL. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

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Re-Blogged 6 times:

Re-Blogged By Re-Blogged At
  1. Debbie Reynolds 11/10/2015 12:52 AM
  2. Morris Real Estate Marketing Group 11/10/2015 07:06 AM
  3. Roy Kelley 12/03/2015 05:00 PM
  4. Hannah Williams 11/11/2015 03:55 AM
  5. Michael J. Perry 12/03/2015 10:08 PM
  6. Praful Thakkar 01/07/2016 04:12 PM
Topic:
Mortgage / Finance
Location:
Connecticut
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seller paid closing costs

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Rainmaker
1,610,442
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg Real Estate

Have to agree with Doug above. I'm not opposed to closing costs unless it comes with an offer thats 15K below list. Just had one today as a matter of fact. Don't know which made the seller (and me) more mad.

Nov 09, 2015 08:11 AM #32
Rainmaker
503,567
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

In our area, buyers asking for closing costs and/or sellers offering that they will pay a certain $ amount $ toward the buyer's closing costs is very common.  It does not depend on a buyer or seller market ... it's just a common practice here.

Nov 09, 2015 11:31 AM #33
Rainmaker
401,635
John Wiley
Fort Myers, FL
Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA

Great post on the benefits of Seller paid closing costs. This is a great tool to use to help first time home buyers who have limited funds for closing to make the deal happen. As agents we need to know the value for buyers and sellers so we can help them structure a deal that is doable.

Nov 09, 2015 11:32 AM #34
Ambassador
1,945,395
Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

George Souto  what a wonderful post . So Glad it was Featured . i just got home from a long day but I am going to re-blog this . this is full of wonderful facts

Nov 09, 2015 11:36 AM #35
Rainmaker
1,317,757
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

George -- you raise a lot of good points  --  The issue often becomes the appraisal... so that is something that has to be taken into consideration.

Nov 09, 2015 12:07 PM #36
Rainer
528,254
Dörte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear George,

Right on the money! Few countries have buyer agency or formalized MLS systems, so it takes people on average several years to sell their homes. Sharing makes our markets lightening fast by comparison. Same with closing help. If it broadens the buyer pool, it speeds things up & likely even raises prices.

Nov 09, 2015 01:13 PM #37
Rainmaker
1,069,462
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

George, this is a great discussion of the pluses of Seller contributions! As I research sales data for clients, I occasionally see Seller contributions, even though we are in a Seller's market.

Nov 09, 2015 03:43 PM #38
Rainmaker
1,570,982
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, Blackstone Realty Group - brokered by eXp Realty - Kalispell, MT
The House Kat

Yes, seller concessions are still fairly common here; the main potential problem is the appraisal value.

Nov 09, 2015 07:45 PM #39
Rainer
500,751
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Sellers concessions is a marketing tool that may be used if necessary, however, to use it as a tool to help a buyer qualify  is an issue that I oppose. Buyers who stretch their buying power by seeking closing costs paid by sellers is a hazard waiting to occur and IMO a primary reason for defaults. 

Nov 09, 2015 08:03 PM #40
Rainmaker
1,911,676
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

An agent needs to master the amount of allowable closing costs permitted by the major forms of Financing as most consumers have accumulated less than 10% of the Purchase Price (to buy ) !!!

Nov 09, 2015 08:35 PM #41
Rainer
292,121
Ron Aguilar
Continental Mortgage - Saint George, UT
Mortgage & Real Estate Advisor since 1995

From a lender perspective consessions from a seller can be important to all parties. When I work with my buyers agent we normally come up with a needs list for the buyer. Without going into alot of detail, its best to work with an agent that is listening to the lender and what will help the buyer overall.

Nov 10, 2015 02:57 AM #42
Rainer
93,494
Patrick Willard
Rio Rancho, NM

It's very common in our market, especially on the lower priced homes. I've had a few sellers over the years that don't like it. I've heard some say "Why should I pay their closing costs, nobody paid mine when I bought this house?" I explain that as long as we can cover it in the price it shouldn't matter to them. I've often said "Why care what you're paying for them as long as you're happy with what you net?" Most get it, some don't. A recent seller had a $115K sale fall out due to repair issues. New buyer comes along and pays $125K with about $3200 in concessions. The seller still complains "I'm paying all their damn closing costs" no matter how often I explain she's netting more.

 

Nov 10, 2015 04:37 AM #43
Rainmaker
1,543,227
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Fifteen Years Experience in Brevard County

As long as appraisal is OK and net is where the seller wants to be with the assistance, why not?

Nov 10, 2015 05:19 AM #44
Rainmaker
5,822,379
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

This is excellent information to share and I will schedule a re-blog in December.

Nov 10, 2015 11:14 PM #45
Rainmaker
816,802
Troy Erickson AZ Realtor (602) 295-6807
Good Company Real Estate www.ChandlerRealEstate.weebly.com - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

George - I have not seen too many deals with seller paying closing costs recently. We have been in a pretty strong sellers market, and homes are selling quickly.

However, I can see where paying buyers closing costs could really benefit the buyer, but at the same time, if a buyer doesn't have enough money to pay for closing costs, that could mean financial issues in the future.

Nov 11, 2015 12:08 AM #46
Rainmaker
3,648,985
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hi George -- while seller paid closing costs are not as prevalent in our current market, there's certainly something to be said for increasing the size of the buyer pool when the need exists.  Jump in and test the water, right?

 

 

Nov 11, 2015 04:18 AM #47
Rainmaker
138,471
Kelly Turbeville
Keller Williams - Lake Forest, CA
Turning Real Estate Dreams into Reality

We don't see it much here anymore, but sometimes.  Inventory is too low, thus still a sellers market.  But I have had success with this strategy quite a few times. Good reminders for sellers...

Nov 14, 2015 05:03 AM #48
Rainmaker
420,106
Trent Dalrymple (248) 854-0625
Texana Bank - Bloomfield Hills, MI
Allowing Mortgage Professionals to Lend Nationwide

As you mentioned (and several comments above) it's best the sellers keep an open mind about paying buyer's costs to move the deal.  My company even has a purchase loan program that is specifically designed for the MI (mortgage insurance) to be paid by the sellers.  How many times have sellers dug in their heals on refusing to pay buyer's costs and end up waiting months until forced to take a lower offer that nets the same amount?  

Nov 15, 2015 09:38 AM #49
Rainmaker
1,431,717
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

They can be a great tool and do work for both sides.  However, in a hot sellers market all things being equal they can work against a buyer, even if the net offer is the same.

Nov 19, 2015 08:53 AM #50
Rainmaker
3,940,418
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning George Souto ,

I was so glad to see Praful Thakkar reblogg your post! I remember reading it before and its a keeper!

Jan 07, 2016 08:58 PM #51
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