This is a relatively rare occurrence. However, two good reasons exist that would convince a seller to pay closing costs.
Why Would the Seller Pay Closing Costs
Let’s face it, most buyers have to save up for quite some time in order to get the required down payment, whether it be three and a half percent FHA or 20% conventional or something else. To be realistic, it takes time to save up that much money. But when they write a contract is when many buyers learn that also they need the closing costs.
Closing Costs Aren’t Cheap
Closing costs can easily run to $8,000 – or more. And since they need to be paid in cash, this may cause the buyer to be unable to complete the transaction. And this could cause the seller to lose the sale. By offering to pay the closing costs, you can enable a buyer to be able to purchase your house. The funding for the closing costs can come from having the buyer pay for example, $8,000 more for the home. That is, buy it for more than they would if you didn’t pay the closing costs. However, this allows the buyer to have the closing costs folded into their mortgage payments. After all, $8,000 on a 30 year mortgage at today’s rates will add slightly more than $1 a day to your mortgage payment. And you won’t actually pay $8,000 until 17 and a half years have passed. And let’s face it, most people won’t still be in the house in 17 and a half years.
But either way, it’s a way to help your house get sold.
The Bad News
It’s possible that by raising the selling price on a home will have an effect on the appraisal. Specifically, the house may not be worth the selling price plus an extra $8000. And that may prevent you from getting the mortgage that you need to go ahead with the purchase. A good Realtor can do a Market Analysis which should give you an idea as to whether or not the appraisal should come in at a workable number.
Bottom Line
This is a way to conserve cash for the closing, while adding a very small amount to the monthly payment. Have your Realtor structure the contract in a way that will allow this to happen. And if your Realtor doesn’t know how, maybe you need a different Realtor.
Hey – here’s an idea. Call us, call Bunny and Art Reiman – Realtors – we know how to make this happen.