Closing costs- who pays right now?

Question

Are you finding that buyers are asking you to cover their closing costs?

I understand it varies market to market (I am flipping in Fort Wayne Indiana) and I am in a sellers market right now but I was taught to factor the buyers closing costs into my expenses just in case.

Curious to know what you are seeing out there?

Nick C. · Answer

In our area I'd guess more than 50% of buyers need closing cost assistance. Not just a request, but have no hope of covering the down payment plus closing costs. Banks are lending money more freely now, and when that happens people who probably can't afford to buy a house yet do it anyway.

Dan Perrott · Answer

@Thuy Pham-Satrappe - wrote 2 contracts in the last week in Indianapolis both at 50/50 split on closing costs.

Dan Perrott · Answer

@Thuy Pham-Satrappe - good catch... the seller pays their closing costs and 1/2 of mine.  They pay 100% for the deed insurance as they are required to supply me a clear and clean deed.

Eric M. · Answer

In Chicago, the buyers basically always ask for at least some to be covered.

Charlie MacPherson · Answer

@Thuy Pham-Satrappe I see many and perhaps most of my buyers asking the seller to cover some closing costs.  Typically in the $3,000 - $5,000 range.

I've even heard of some asking the AGENT to cover them - to which my response is not only no, but HELL NO.  I don't give away my paycheck because you want to buy more of a house than you can afford.

I'm selling my house as we're relocating to Maine later this year.  If I were to get my asking price with $5,000 back for closing, I'd talk with the lender and see if it was required for the buyer to qualify for the loan.  If it isn't, I'd try to negotiate it down, or just refuse.

It depends on your situation though.  If you're under pressure to sell quickly, I'd be more inclined to agree to pay some or all of their closing costs.

PRO-TIP - if you do, be sure to limit the amount.  For example "Seller shall pay up to $5,000 in closing costs".

I represented a buyer where I got the seller to agree to cover ALL closing costs on an MFR.  He had an exceptionally weak agent and I was able to walk all over him.

Ethically, of course, but he was in over his head.  Real estate is no place for amateurs.The lender added some substantial pre-paids, and he ended up covering $16K in closing costs.  The agent later called and said that the seller was asking for both of us to kick in some of our commission to cover the cost.

Err...no.

Nick C. · Answer

@Thuy Pham-Satrappe

Sometimes they up the offer price to compensate. For example, if we list a property at 150k, they will offer 155k with 5k seller concessions. So in a sense, yes they are rolling them into their loan in a round about way.

Jake S. · Answer

@Thuy Pham-Satrappe I'm glad to see you are thinking ahead of potential profit taking scenarios like this. I find being extra conservative in your projections is the best route!

Thuy Pham-Satrappe · Answer

@Jake Stuttgen that's my thought process too!! 😊

Jake S. · Answer

Hey @Thuy Pham-Satrappe! Some buyers will, some won't. It really depends on the buyer and what they find during an inspection in my experience. I think it's always something smart to budget for, and if they don't ask it, then the extra $$ you make is just gravy!

Crystal Smith · Answer

@Thuy Pham-Satrappe When we run our numbers for a flip we assume we usually add a miscellaneous 3% to cover things like covering a part of the buyer's closing costs.  Especially if the property is targeted for a first time buyers.

Closing costs- who pays right now?

Most Popular Reply