Comments on: Sellers Should Pay All Closing Costs http://blog.franklyrealty.com/2010/02/seller-closing-costs.html Tue, 07 Sep 2010 13:27:28 -0700 http://wordpress.org/?v=2.8.4 hourly 1 By: ga-seller http://blog.franklyrealty.com/2010/02/seller-closing-costs.html/comment-page-1#comment-4593 ga-seller Tue, 07 Sep 2010 13:27:28 +0000 http://blog.franklyrealty.com/?p=356#comment-4593 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? 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?

]]> By: James Brennan http://blog.franklyrealty.com/2010/02/seller-closing-costs.html/comment-page-1#comment-4592 James Brennan Fri, 03 Sep 2010 22:44:02 +0000 http://blog.franklyrealty.com/?p=356#comment-4592 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. Site: http://www.wwwebtax.com/deductions_z_other/home_purchase_costs.htm 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.

Site:
http://www.wwwebtax.com/deductions_z_other/home_purchase_costs.htm

]]> By: FranklyRealty.com http://blog.franklyrealty.com/2010/02/seller-closing-costs.html/comment-page-1#comment-4566 FranklyRealty.com Fri, 02 Jul 2010 06:33:19 +0000 http://blog.franklyrealty.com/?p=356#comment-4566 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. 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.

]]> By: Heidi http://blog.franklyrealty.com/2010/02/seller-closing-costs.html/comment-page-1#comment-4564 Heidi Wed, 30 Jun 2010 14:32:54 +0000 http://blog.franklyrealty.com/?p=356#comment-4564 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? 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?

]]> By: Estate Yard http://blog.franklyrealty.com/2010/02/seller-closing-costs.html/comment-page-1#comment-4552 Estate Yard Wed, 23 Jun 2010 07:55:54 +0000 http://blog.franklyrealty.com/?p=356#comment-4552 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. 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.

]]> By: Brandon http://blog.franklyrealty.com/2010/02/seller-closing-costs.html/comment-page-1#comment-4497 Brandon Tue, 16 Mar 2010 19:35:04 +0000 http://blog.franklyrealty.com/?p=356#comment-4497 Frank, 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? Thanks. Brandon Frank,

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?

Thanks.

Brandon

]]> By: gpc http://blog.franklyrealty.com/2010/02/seller-closing-costs.html/comment-page-1#comment-4491 gpc Fri, 12 Mar 2010 22:57:59 +0000 http://blog.franklyrealty.com/?p=356#comment-4491 Hey Frank, just saying hello and thanks for the blogs and the franklymls site. I have found them to be very helpful and informative! Hey Frank, just saying hello and thanks for the blogs and the franklymls site. I have found them to be very helpful and informative!

]]> By: Rob Allen http://blog.franklyrealty.com/2010/02/seller-closing-costs.html/comment-page-1#comment-4465 Rob Allen Wed, 03 Mar 2010 03:15:59 +0000 http://blog.franklyrealty.com/?p=356#comment-4465 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. 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.

]]> By: Jean Heneghan http://blog.franklyrealty.com/2010/02/seller-closing-costs.html/comment-page-1#comment-4421 Jean Heneghan Fri, 12 Feb 2010 18:27:08 +0000 http://blog.franklyrealty.com/?p=356#comment-4421 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. 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.

]]> By: cara http://blog.franklyrealty.com/2010/02/seller-closing-costs.html/comment-page-1#comment-4412 cara Fri, 12 Feb 2010 15:27:57 +0000 http://blog.franklyrealty.com/?p=356#comment-4412 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. 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.

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