Sellers Should Pay All Closing Costs

Ok, this is kinda tricky to explain, so bear with me.

I feel strongly that ultimately the seller should pay for all (actually “most”) closing costs. But not in the way that you might be thinking. And this type of post will lead to the 101 hyper technical “but what if” scenarios and counterarguments.

I’m not talking about “Negotiate strongly and beat down the seller by getting closing costs thrown in, heck this is a buyer’s market!”
I’m talking about “The seller should care about their NET.” Once the net is established, go back and ask if the price can be adjusted (INCREASED) to include closing costs.

Example: $500,000 with 0 closing costs vs $510,000 with $10,000 back.

The higher the recording closing price, the better for the buyer. Ie $510,000
1) In the short term for comps: The higher it records on the county records and the MLS the better it is for “comps.” In other words it helps the next similar unit close for higher, which is better for the buyer (ie more of the cheesy “instant equity”).

Note that the MLS DOES show the seller subsidy (closing costs paid by seller) in Virginia, DC, MD, but
a) not everyone sees it (even though FranklyMLS nets out all closing costs when showing sold prices).
b) not all appraisers will adjust 100% for it (thus helping the next unit appraise for higher).

2) Better loan.
For some people adding back in 2% in closing costs, can help people jump from a 15% down loan to a 20% down loan, thus dropping the rate significantly.

3) In the long term: since the county records do NOT show the closing costs, this helps the buyer when they sell the unit in a few years. Many do-it-yourselfers and data hounds will say “well you bought it for $510,000… therefore” instead of “well you bought it for $500,000… therefore.” I would rather make it look like I spent more (and in essence, with all the closing costs, you really did spend $510k, so why not have people see that number?).

Common counter-arguments:

1) Some will say this artificially inflates the marketplace and might lead to a subsequent crash. Answer: I’m talking about a benefit to the individual buyer. A buyer agent’s job is to do what is in the best interest of the client, while being legal.

2) Taxes will go up. Yes, perhaps. Maybe $50 a year, big deal.
Buyer tip: See post on NOT using Tax Assessments to value a home)
Seller tip: Since some buyers DO use this, the HIGHER the tax assessment the better, so think twice before fighting to get it lowered, see post)

3) Seller might have to pay the commission on the seller subsidy.
Yes, this might be the case. The buyer can offer to pay the difference. Or skip the idea of asking for more seller subsidies after the fact, and ask for it up front in the initial offer.

Things to watch out for:
1) Don’t make the seller subsidy too high. This isn’t free money. Sometimes a lender will say “sure we can use up 3% or 4%”, but that defeats the point. Don’t start buying points if you weren’t already planning to.

2) The contract reads “Up to X in seller closing costs.” If you put a number that is too high, then the rest goes back to the seller. You can maybe add in your contract “unused closing costs will result in a drop in the contract price, with the same net to the seller.” Or get from your lender the closing cost estimate and leave $2,000 in wiggle room. Also if you need to use up the funds, you can count your home inspection and sometimes up to a year in condo fees. Worst case scenario, you can do a 2-1 buy down (more complex, prepays part of your mortgage) to use up funds.

3) Watch out if you ask for a credit for home inspection items, you don’t want your credits to go so high that the lender won’t allow it.

4) This might get tricky with how the appraisal is handled (it can actually help), but I can go into that next time as that can take a long time to explain.

Sorry if this was a little complex, but it is something that I strongly believe in, and I think most of you will get it. Feel free to add more “well, what if…” I did it for my personal home, and I would do it to help my clients.

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Written by Frank Borges LL0SA

Cash photo by emdot

  • 11
  • February
  • 2010

61 Responses to “Sellers Should Pay All Closing Costs”

  1. Joshua says:


    Well said. Every dollar of closing costs is effectively financed by the buyer in at least the transactions in Georgia. It should always be NET TO SELLER that matter. The CHECK at the closing should be all that matters. Unfortunately, there’s lots of people that say, “I ain’t paying no closing costs!” Meanwhile you can take them to the cleaaners on other items (if you represent the buyer).

  2. Frank- informative post for Home Buyers. The key to a Home Buyers success is aligning themselves with a strong buyers agent who “get’s it!” and can help then get the terms they need for the home they want.

  3. Bob Sokoler says:

    Frank,.. tried it for more than a year… stopped doing it 6 months ago.. here’s why.
    1) We started to come across sellers who refused to change the sales prices after the contract was signed off on by both parties. We almost lost a deal over it. We even offer to eliminate commission on the increased difference.
    2) Appraisals are tighter than ever and the extra closing costs can put the property price over the top. We had that happen with a condo and the deal fell almost fell apart. The buyer had to borrow money (after our client refused to meet half way and reduce sales price).
    3) Most Mortgage brokers don’t get it.. they tell buyers to ask for closing costs up front saying something like “Just have the seller pay closing costs”. The mortgage industry ignores the fact that it effects a sellers bottom line (it makes the mortgage brokers job easier selling the loan) so the pressure of writing the contract with closing costs included up front is planted in a buyers mind. If we as realtors try to change that buyers mind (and roll in closing costs after the contract is agreed to by increasing sales price) after buyers have met with the mortgage broker we’re met with resistance. The 1st time buyer thinks they are now paying the closing costs (rolled into their mortgage). They don’t understand that if we roll in the closing costs at the start, the seller will just increase their bottom line to compensate for the closing costs. I know this concept may sound ridiculous but it’s true. It’s a question of semantics.. but it happens all the time.
    To sum it up, I agree with all your points (including one you missed…it streamlines the offer and gets to the heart of the bottom line price), but after trying it for more than a year we gave up.

  4. Frank – love #2 under things to watch out for. You always have a unique point of view and a new way to get the best deal for the client. Maybe I’m too honest, but I would rather put it up front then wait until after the initial contract is ratified. To me the only way it makes sense to wait is if you get a higher appraisal value in and realize that you have some more room.

  5. cara says:

    Having a 20% down conventional loan benefits the sellers as well, since it eliminates the need for an FHA appraisal process. Given that currently there are few alternatives to 20% or FHA, and that most people are pushing it to have 20% down, it only makes sense to have the seller smooth the transaction by folding the closing costs into the price.
    I’m surprised that seller’s would care about more than their bottom line net. Sure, you want those closing costs to be minimized and realistic to make sure it appraises, but other than that, I don’t see why a seller would object. Although I’m not sure why you’d go for the bait and switch rather than asking for closing costs in the original offer.

  6. As a listing agent, when the seller is paying buyer closing costs I always write an addendum stating that the commission will be based on the sales price minus the seller-paid closing costs. This makes me a hero in the seller’s eyes, and doesn’t actually cost me much. Besides, that’s only fair.

  7. Rob Allen says:

    I think this sounds great from a buyer’s perspective, but getting a seller to accept is not always easy.

    Sure the seller should mostly be focusing on what their net sales price is, but when they agree to pay a large portion or all of a buyer’s closing costs they are then forced to shoulder the risk of the property not appraising. This is a huge issue with how tight the appraisals have gotten.

    If the appraised value comes back low do you think the buyer is then going to ask the seller to lower the sales price to meet the appraised value and then also agree to lower the seller subsidy to give the seller the same net as before? Not in my experience.

  8. gpc says:

    Hey Frank, just saying hello and thanks for the blogs and the franklymls site. I have found them to be very helpful and informative!

  9. Brandon says:


    I can see that where you’re selling homes, it’s pretty pricey, so I can understand your commitment to your clients and all the things you do for them. I live in Houston, and the prices (at least what I am looking at) are around 130s-150s. What should I be expecting from a Realtor in regards to their level of commitment and how much extra they should be doing when I know that their commission isn’t as large as yours would be?



  10. Estate Yard says:

    I’m with you on this one. I try and get my buyer’s closing costs paid by the seller, and if they aren’t willing to do so, then I try to see if we can net the seller the same amount will still getting them to concede closing costs for the buyer.

  11. Heidi says:

    We have our home on the market and have been approached with this idea. We understand it and are ok with it as sellers. My question is how much-if any of the closing costs can you write off on your taxes?

  12. says:

    You would obviously have to ask your accountant, but I know of no tax benefits for the seller for doing this. Whether the price is $10k lower or you offer $10k back, the IRS should look at the NET. And the closing costs are expensed by the buyer, even though you gave money to pay for it.

  13. Frank,
    Excellent post.
    Here’s a site that summarizes what is deductible and what is added to your cost basis and thus helps calculate your capital gain (Net Sales Price minus Adjusted Basis).

    For my investor clients selling property, the increased “transaction costs” reduce the capital gain deferred, and end up increasing your “fresh basis” to be depreciated on replacement property.

    (Example, Investor A sells for 500k, and has a 200k adjusted basis, and is responsible for zero closing costs and sells as a FSBO. That seller buys a replacement property of 550k. He takes the new property with a 250k (200k+50k trade up) basis. In your example, seller pays closing costs of 10k on same value to keep it simple (net sales price is reduced to 490k, adjusted basis is 200k, replacement property is 550k), seller takes replacement property with a 260k basis. More depreciation to take to offset income on the property.


  14. ga-seller says:

    Ok so when is enough enough…
    On a $328000 sale we agree to pay $8000 in closing, yes we are worried about the appraisal and would have been much better off with a lower sales price… but, what gets me is now the buyer is asking for compensation on things on the inspection report that ‘will require replacement soon’ not that it needs it now, but sometime in the future.
    How far over does a seller have to bend?

  15. Sheri Chase says:

    How far does a seller have to bend? They do not have to bend at all! Sell ‘As Is’, which means, what you see (or don’t see) is what you get.

  16. Frank Rush says:

    Great post Frank and a lot of great comments. Completely agree that the seller should almost always pay the closing costs, especially at current interest rates.

    Frank Rush

  17. Nichole says:

    Hey Frank,

    I’m a perspective buyer and I’m wondering how much wiggle room there is with foreclosure property? Will the banks pay my closing costs or do they hold firm so a not to lose more on their investment?

  18. lyn says:

    Qustion.. If a seller ask you the buyer to pay his closing cost how can you work around this without walking away from the deal Thx Lyn

  19. ALAN says:

    I’m in the process of purchasing a home and the loan I’m looking at has a $18K rebate which can be used towards my closing costs. My closing costs are $13K which means I will have $5K left over. The mortgage broker has told me that the difference ($5K) cannot come back to me at the close of escrow. It must be used to pay costs while in escrow. My question is I need some creative ways to use the remaining $5K. Can I pay the Seller’s closing costs and have them write me a check at the close of escrow for the $5K?

  20. says:

    First of all I would be cautious about a program that “gives” you back $18k. Where do you think that money comes from eventually? YOU!! Either through a higher rate or something. Look into options with less money back and a lower rate.
    To answer your question, you can also apply the money toward the home inspection (even if already paid), termite, and sometimes 1 or 2 years of prepaid HOA fees. No you can not pay for Seller costs and have them write you a check.
    You can also look into whether you can prepay a month of your mortgage (sometimes moving the closing date a couple of days and trigger more money on the HUD1. And no, you end up paying the same in the end, it is just how much of it is prepaid fees.) And lastly look into a 1 or 2 year prepay. Where you use some some of the closing costs to pay either all or part of the next few months. Obviously all has to be approved by the lender.

  21. Liz says:

    Here is my issue.
    Since realtors (and brokers) had a fair hand in creating the housing bubble, why would they expect to feel no pain as it relates to the commission on either the sell/buy side of the transaction? I propose a fee that is correlated to the ratio of selling price to equity/or price owed on the property as a more fair and balanced strategy. I was stuck with an agent for 8 months and she did little more than violate my privacy (by revealing the security code to my home system to random agents) or sending me an email at 10 pm to inform me of a showing the next day. I also have some issue with real estate agents (mostly women) who do not educate their buyers as to the seller situation and impose their last minute request for a showing with little or no respect for the seller. This has soured me on agents in general. I was directed to your website by a friend (after I disclosed these musings) and wonder what your take on this is.

    One other point. What incentive do I have, as a seller, to make a deal, if someone not only comes to me with an offer that is much lower but also an expectation to pay selling costs? It should be either/or.

  22. says:

    Do you really think Realtors and brokers have experienced no pain? I guess it is easy to say that if you aren’t one. I believe that 30-40% of the Realtors got out of the business completely. That is pretty painful.
    As for me, I did not experience pain because when 30-40% get out of the biz, and other reasons, I am fine. And you can’t blame me for the bubble when I was giving clients tShirts that said “I just bought during the 05 Housing Bubble.” I told them, yet everyone wanted to get rich. There are only so many people I can talk out of buying before one still decides to buy.

    As for the profit sharing idea. Yeah right. So if your home was bought for $300k and suddenly is $500k, are you going to go with the Realtor that charges based on your profit? No, you will suddenly conveniently change to the other system. And when you buy for $500k and need to sell for $300k… what agent will be willing to pay you to list their house?

    As for having skin in the game, we do that. We say that if you buy a house from us, when you go to sell it, if you don’t make a profit (not counting your upgrades) then we sell it for free. I can’t do much more than that, sorry.

    Just because you might have had a sucky agent, doesn’t mean we all are. So many times when I hear about a sucky agent, my follow up is “So did she give you a special deal” and they tend to say “well actually yeah, I was able to negotiate her down to XYZ commission.” And then I laugh. Hummm see a coincidence? How well do you think she/he will be able to fight for your top dollar if they can’t even hold up their own commission. (on the other hand I don’t believe the “you get what you pay for” approach since many sucky agents overcharge and somehow stay in business.)

    As for being mad at your listing agent for the buyer agent interrupting your day to show your house, that is just a simple case of completely not getting it. That is how it is goes. The buyer gets off work on Friday at 6pm and they look to see what homes they can visit Sat AM. You want the Listing Agent to yell at the buyer agent to yell at the buyer? Come on.

    The #1 worse thing you can do in selling your place (slight exaggerations since there are many bad things) is making it HARD to see a home. If I am showing 10 condos to a buyer, and 6 of them are vacant and easy shows, and 2 have dogs and require 48 hour appointments or a call the day of to set up a time (which is nearly impossible when you have no idea how long 6 homes will take)… guess which home gets cut first. YOURS. I will see yours last. (Note that when a buyer is REALLY ready, I sometimes go out of my way to see the super hard homes to see since those sell for LESS because nobody can freaking get in them!).

    I like to have my listings say “Call first then show, no appointment” Or “Leave message and show” Or “Knock first and then show, no need to make appointment”

    Guess who gets more showings? Guess who sells faster and for me (so much so that we frequently get calls from other agents saying “how in the world did you get that price?”

  23. liz says:

    Hey Frank,
    I responded to you privately and thought I’d return the favor by posting publicly.
    First of all, I get that everyone should get paid for what they do, and fairly. And that is my exact point, fairly. I’m only suggesting that the seller agent take a look at the individual situation and tailor their approach. The days of a fixed commission are dated (a paradigm created by the real estate community). Secondly, I did not say I had a “sucky” agent. You characterized that relationship-incorrectly. As much as you like to think of yourself as the king of no BS- telling it straight is only a piece of the pie. Relationships matter. If you create an atmosphere of trust, that’s what sells.
    All of us have lives that may or may not fit conveniently into the schedules of an agent showing condos in Arlington, VA. It’s the agents’ efforts with those situations that are not so neat and nice and convenient that show us what you guys are made of. Life- it’s an inconvenient truth- but adjustments need to be made to serve the customer. And as far as “realtors” go- every Tom, Dick, and Harry who was working in a retail job during the boom decided to “be” in real estate- and guess where half of them are now? Back to schlepping phones at the local PCS store. One of them personally worked for me, so your stat (I thought you hated statistics) is skewed. You’ve survived because you ARE a Real Estate professional and took advantage of the dummies who had no clue.
    Am I bitter? I don’t think so. But I think your response shows your ego. You may want to be (or perhaps you already think you are) the best in the business, but your response shows you care about the business, but not about the people. I want both.

  24. Rhonn Ramirez says:

    Thanks Frank, for your insite! I do have a question for you? We saw this home that has been on the market since 11/11/10. The selling price then was $167,000.00. Earlier this spring it was reduced to $153,000.00. We today 08/23/11 (almost a year later) put a bid in for $148,000.00 and pay half of closing cost!

    Our realtor told us that He’ spoke with Her’ realtor (WHO by the way are the same group of people in an office building-under the same business name); AND said….that she would take the $148,000.00 BUT WOULD NOT PAY ANY CLOSING COST!!

    We just sold our home of 15-years and were advised to at least pay half of her closing cost! And after going back and forth…we ended up paying out $5000. vs. the $3000. in order to make the sale!

    Using the same Agent for both Sell and Buy…I’m starting to feel uncomfortable, Especially….NOW that I found out that the “Sellers agents…work for the same company as MY agent/in the same building”

    So any thoughts….to my questions/statements…would greatly be appreciated. Thanks in advance :-)

  25. says:


    My advice is to focus on the NET (amount you take home in your pocket). Too commonly people focus on the wrong thing. Like in your home that you sold, are you telling me you would not have paid 100% of their costs…. if they gave you $10k higher in price? Of course you would have taken that.

    So in the current deal, do not think of it as NOT PAYING ANY… , instead calculate the closing costs. Lets say it was $5,000. And you asked for $2,500 (half). NOW FOCUS>>> Their counter is a $2,500 counter. It has nothing to do with closing costs or not. The question is whether you accept their $2,500 counter. You have the right to say no. Heck you could say “Ok I will take it with no closing costs, but we want the price of the home to be $X lower”, it is the same thing. So then it comes down to a bluffing match and how much you want the home and how much they need to sell it.

    The fact that your agent works in the same company as the seller… well that is an entirely different blog. Also I would ask for counters in writing. I don’t believe in verbal “well would ya do this” and “Well I dont want to waste their time.” You get a better price when the other side spends time and energy in the process.

  26. LisaMc says:

    I stumbled upon this website when I was surfing the internet. I am not a realtor but a first-time home buyer. Since most of the posts are from realtors, perhaps you might like a fresh perspective from a buyer.

    I think it is BEYOND IGNORANT to expect the seller to “pay” for a buyer’s closing costs. I know in my price range (looking for a home in Pennsylvania) my closing costs will be anywhere from $10-12,000. I expect to pay for my closing costs and would never dream of palming that responsibility off on the seller. Of course, negotiating appliances or other little perks (like furniture) is acceptable; but if as a buyer I cannot pay my own closing costs, then what the heck am I buying a home, then? It’s irresponsible for a buyer to palm off his or her financial responsibility onto the seller, who has to pay the buyer’s agent’s commission and other items to begin with.

    No offense intended, but after having a really bad experience with an agent who sold my mom’s house after she passed away, most realtors only see the commission and aren’t too terribly bright to begin with. My agent knew nothing about the removal of knob and tube from my mom’s home, even though I disclosed it in the seller’s disclosure. A heads up from him months earlier (advising me to remove it) would have helped me immensely down the road. I lost a potential buyer because of his lack of expertise.

    Most of you really aren’t the brightest pencils in the box and don’t really service your clients at all. You are nothing more than glorified chauffeurs!

  27. says:

    Hello Lisa,
    Thank you for your comments. It is evident that you only read the title and skipped the meat of the message.

    Or you read it and didn’t understand it.

    My recommendation is AFTER a price is agreed upon, then INCREASE the price by the cc and have the seller cover it with those extra funds. With the same NET to seller. No burden on the seller as you claimed.

    Oh well, I can only walk you to the water. I can’t make you drink it.


  28. LisaMc says:


    With all due respect, you are ignoring the negative impact that this type of arrangement creates down the road. You provided it in the counterarguments: “Some will say this artificially inflates the marketplace.” Your response to the counterargumenet is that your responsibility is to your client, but it’s fiscally irresponsible! We are still feeling the effects of the real estate market crash in the fall of 2008, and that has a negative impact on ALL homeowners, not just your clients. Inflating the market helps no one, and I am sure you will agree that realtors don’t have that many buyers out there so inflating the price of a home hurts your line of work also.

    Secondly, you are confusing “tax assessments” with actual home value through appraisal or comparables. Tax assessments are just a way for local/county taxing agencies to have a fair and equitable property value for a basis of taxation. Assessments are NOT comparables, so inflating the buying cost does increase property taxes artificially. Just because someone paid $10,000 more for a home doesn’t mean the next buyer down the road will be impressed by that and increase his offer. Market conditions impact the selling price as will the home appraisal, NOT the tax assessment.

    Tax assessments were designed to keep homeowners from “hiding” their assets, that is, trying to reduce the value of the home to keep taxes down. That’s why assessments are mandated periodically from time to time.

  29. says:

    I am glad you think you know so much about tax assessments and how they relate to comps.

    While you SHOULD be right that tax assessment has no place in comps, you need to tell the millions of buyers that incorrectly rely on them when buying a house. Or they rely on Zillow Zestimates (again derived from the sold price in the tax records).

    If you had any idea how many buyers have said “no way, I am not paying over tax assessment (or Zestimate) for that place.” It is laughable. So yes people incorrectly use tax assessment (which oftentimes uses the home’s sale price in its equation).

    And no, I do not agree that the numbers of buyers that we represent have dropped. And I am willing to put my client first, even if it hurts my line of work as you claim it does. Would you rather have a Realtor that puts themself first?

  30. Dayami says:

    Hi Frank
    When buying a house for $230,000 can I ask for all closing cost to be paid by seller? And what should I expect from them if I ask for all closing cost?

  31. says:

    Dayami, It doesn’t work that way.

    Did you ever see that Carmax commercial? They talk about how an old fashioned used car dealership works. They show a long skinny balloon. And they say you might be able to squeeze one side, but it just makes the other side bigger. The dealer makes the same amount.
    So your question is like asking “Will the dealer take $10,000 for my trade in?” Meanwhile, lets say that Trade In is worth $7,000.
    So will the dealer give you $10,000? The answer is SURE!! As long as you overpay for the car you are buying by at least $3,000.

    In your situation if you offer $250,000 (which I am not saying to do), the seller would be thrilled to pay your $5,000 in closing costs. Why? Because he just NETTED $15,000 over list price.

    Bottom line is you have to look at the asking price. Then look at your NET offer (your offer minus closing costs). And you have to then play the bluffing game to see who needs to sell or buy more.

    Or you can come to a price (below list), without closing costs, and then AFTER agreeing to the net price, THEN talk about adjusting the price so the closing costs get rolled into the deal (with the same NET to the seller).

    Make sure you have a great agent helping you with this.


  32. Dayami says:

    Hi Frank
    Is there any way for me to know if my broker is trying to make more money off the loan and what can he do to keep closing cost to a minimum?

  33. says:

    You can ask him whether he has an “Affiliated business arrangement” with the lender. You aren’t really supposed to do that, but some places find a work around and will bury it in the papers they have you sign up front.

    Also when you put in your offer, there is no problem with making the offer include all closing costs. It all depends on the home. If it is $200,000 and has been on the market for a long time, and YOU decide you want to offer $175,000 (do not use that number, I am just throwing random stuff out) then you can write up the contract as $185k with $10k in closing costs. (ie $175k net). Now they might counter and cut down the closing costs. Like they might counter at $197,000 with $5k in closing costs. In that case, their NET counter is $192k. If you are ok with that net, then you can counter $202k with $10k in closing costs (same net price).

    Note that if you put TOO HIGH of closing costs in the contract, and they exceed the actual closing costs, you may/will lose that money. So don’t go nuts. And some lenders will be “conservative” and tell you a higher number up front and think they are doing you a favor, but then when you close and their fees are LOWER, you lose that extra money. I usually stick to like $2k UNDER what I expect the total closing costs to be.

    Also your agent can show you the last 5 homes and what seller subsidies they have done. Different price points and areas have different local norms.

    One fear for the seller is if you INCREASE the price to include closing costs, then it might not appraise, and both parties have to start the negotiations over again.

    Also as for the lender, talk to 2 or 3. Ask friends on facebook for suggestions. Don’t get stuck with a ton of points and fees. A ton is relative, but talking to 2 or 3 lenders you trust will get you started in the right direction. Do no use Lending Tree or a random internet place.

    Good luck.

  34. Dayami says:

    Thanks very much!!!

  35. Stephanie says:

    I like the idea of “inflating” the price to include closing costs AFTER the two parties agree on a price. I don’t know why it’s not done this way! We’ve listed our townhouse for sale, and have gotten an offer for $40,000 under asking price, and they want 3% closing costs on top of that! Agents should explain to their buyers that closing costs should be a negotiation point, not necessarily a gimme. I don’t think the average buyer understands that paying for buyers’ closing costs affects a seller’s net profits. That $40,000 less offer becomes $46,300 less, and they think we’re being unreasonble? Not hardly.

  36. says:

    Let them offer whatever they want. It then becomes the seller’s job to counter. And the listing agent should ask “we will be countering… do you care if we change the price or the CC”.

    Some buyers don’t have enough money and “need” the CC or they can’t do the deal. This is fine, but then you counter the sales price… all the way up to list if need be. One major problem with closing cost help is it confuses the appraisal process. The appraisal is not based on NET but on the contract page 1 price. You can get creative and put in the contract that if it does not appraise, the contract will self adjust (ie same net) and reduce the CC as necessary.

  37. Stephanie says:

    Thanks. We’ve countered, and they are still coming in too low. We would like to reach a compromise, but at this point, I don’t think they are coming up, and we are not keen to go down too much more.

  38. Stephanie says:

    Ok, I have another question for you: if we agree to 3% closing costs, and then the actual costs are less than 3%, what happens to the excess money? Does the buyer get to keep it? I’m thinking we should say “up to 3%,” that way if it’s 2.5% we “get” to keep the remaining .5%. Is that accurate? I doubt it will be less than 3% in Fairfax County, but you never know, I guess.

  39. says:

    Great question. How does your agent answer it?

    I believe the default of the contact is ” up to”, so yes technically you the seller gets any unused portion. But that never happens. they find a way to fill the void. They buy down points, they use the home inspection receipt, prepay the, loan, prepay hoa fees for two years, etc.

    You might be able to counter 2.5. Or have your agent call the lender to find out what they really need. Sometimes the, lender will tell you.

    Frank via cell (sorry for typos)

  40. Stephanie says:

    Great point, I’ll ask my agent. :)

    I don’t really think it’s fair for buyers to be able to keep the excess to use to pay HOA dues, etc., especially if it is $1000 or more. I guess “fair” doesn’t really enter into the equation when you are a seller in a buyer’s market.

    Luckily we’re not that hard up to sell…just yet, anyway.

    Thanks for your responses!

  41. Paula Clark says:

    I own my house that i am selling outright. Not in any big hurry to sell as i can always rent it out. I am not paying ANYONE’S closing cost unless it is rolled/folded into the agreed upon sales price after the fact like you stated and my agreed upon net selling price is the same. Honestly, where do these buyers have such a huge sense of entitlement that SELLERS are responsible not only their own fees, but theirs as well?! Get real!! I guess I should purchase them brand new furniture for their home too, not to mention all the other (mostly trivial) things they will want “fixed” and replaced due to the inspection. if you can’t afford to pay YOUR OWN closing costs, then don’t be trying to buy a house, or buy a less expensive home so you have money for closing. Seriously, how about they pay my real-estate agents commission? Bet that would go over well.
    Sorry for any typos, I am in a bit of a hurry and am trying to type quickly.

  42. Mimi says:

    Thanks for the info. I was wondering, if the seller gives the buyer credit towards closing costs, does that affect what the buyer can deduct on their taxes? For example, let’s say the seller ends up covering all of the closing costs. Can I, the buyer, still deduct that first month’s mortgage (the interest portion) that is included in the closing costs on my Federal taxes? What if the seller covers half of the closing costs? Do you somehow have to designate that their contribution is or is not specifically being applied to the mortgage payment (as opposed to title search fees, etc.)? Lastly, does it make a difference if the credit is specifically being given as rentback as opposed to just a general credit? Thanks!

  43. says:

    You really have to ask your tax accountant. Here is my 2 cents.
    – Rentback is like rent, that should be taxable just like any other rent would be.
    – Closing costs usually do not include a portion of the 1st mortgage payment.
    – The seller should be able to write off the expense against their taxes or basis, so I don’t see how the buyer could also write it off. But you have to ask a pro.

  44. Investor says:

    Why do you say that you can’t go nuts with this approach? Suppose I have a property I want to buy for 300k and appraised value is 300k. I want to borrow at 80%ltv – i.e. 240k. The bank is happy so long as I don’t borrow more. Why can’t I agree to have the price hiked all the way to 330 and then agree for a 30k credit in the side letter, payable at closing via netting against amounts due to seller, to cover, say “closing costs and renovation expenses.” What would be the problem here? Let’s ignore tax aspects of this for the moment (for seller it doesn’t matter).

  45. Daniel says:

    Sorry to bring back an old post, but I am a first time home buyer and I see a few sellers posting on here about how they refuse to pay any of the closing costs. Get with the program! It is a BUYER’S market out there.
    I don’t make enough to save up for a large amount of closing costs or a down payment, but paying a mortgage is CHEAPER than paying rent each month, so why wouldn’t I try to buy? I think paying some closing costs should be expected for a seller in today’s market. Either suck it up or let your house sit on the market another 60 days before you get another offer!
    Am I right Frank?

  46. says:

    What market are you in? It is a seller’s market here. Multiple contracts, bidding wars, low inventory, selling in three days etc. if you get your info from the news, you might still think it is a buyers market.

    As for buying versus renting, show me your numbers. I maintain that renting is MUCH cheaper and if you aren’t going to live in it for 7 years you are gambling. And saying “if I leave after three years, I will just rent it”.

    Regardless, the seller cares about their NET. Don’t lose that focus. It isn’t about the seller getting with the program.


  47. Isha says:

    Your house is only worth what someone is willing to pay for it. Buyers know that it is a buyers market so they are willing to try to lowball you in any way that they can. Nobody says that you have to take it. I am in the middle of selling one of my homes right now and buyers always start low and think that you are going to jump on it.I think that you have to be realistic about where your home belongs in the market, but I agree with…don’t lose focus.

  48. bill says:

    This is a buyer’s market and no serious seller is going to get a buyer to pay closing costs. Sellers need to wake up and either drop their list price or agree to pay close or keep sitting on their house watching the months roll by. HA HA I LOVE IT that SELLERs are getting hammered.

  49. Connie says:

    It depends on the area you live in as to whether it is a buyer’s v.s. seller’s market right now. While the housing market is starting to recover it still hasn’t completely in a lot of areas; therefore, it is still a buyer’s market in most places.

  50. says:

    It doesn’t matter what type of market it is. You obviously just read the title and not the entire post.

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