Techniques for Covering Closing Costs


Pen & Book by Vjik86Although the days of getting cash credits towards closing costs are seemingly coming to an end with the tightening of mortgage regulations, there are still viable ways to accomplish that goal. Both Non-Agency and Dual-Agency arrangements can be used for this purpose.

Often buyers mistakenly believe Dual-Agency is created when buyers approach a listing agent and ask, “if we don’t have an Agent can we receive the selling office commission (SOC) at closing for closing costs”? What’s actually created in this situation is a Non-Agency agreement.

When agents enter into such non-agency arrangements their obligations are to represent the seller and seller only throughout the sale; thus they will write the Purchase/Sale Agreement (PSA) to reflect that the buyer has no representation (they represent themselves). Non-Agency arrangements offer the buyer no professional representation whatsoever, as opposed to Dual-Agency.

These are not a strategies I recommend anyone (buyer or seller) engage in for minor monetary savings or to expedite a sale. If there needs to be a cash credit at closing to cover closing cost, and the seller does not want to pay-out additional monies over and above expenses already written into the listing agreement, these methods can accomplish that.

In the Dual-Agency relationship, The Purchase & Sale Agreement will reflect that the agency and Brokerage are in fact representing both parties and will be crediting a percentage of the SOC to the buyer. With the approval of the seller the buyer and agent prior to negotiating a purchase sign an agency agreement. This insures both parties (buyer & seller) are proceeding with professional advice.

Previously, as a dual-agent I’ve granted as much as two thirds of the SOC to the buyer, and then reduced the listing side of the commission by 1/3 so that the seller may also enjoy a savings.

Upon closing, the seller saved money and the buyer got a substantial amount of cash towards closing cost’s, Structuring a sale like this works well on a newer model or fully refurbished home where controversy over price and repairs are not an issue.

Dual-agency relationships can certainly be a vehicle towards conflict of interest by the agent if not handled properly, and should be avoided as a general practice. Non-Agency relationships can accomplish the same monetary goals, but offer the buyer no professional advice.

Nevertheless, if both parties desire and agree to either Dual-Agency or Non-Agency representation they will accomplish the goal of covering closing cost when other methods are not available.

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  1. Steven Boorstein on

    Good article. I have never used this approach to help pay closing costs. I didn’t realize that agents were open to this and think that agents who do this are promoting an ethical practice. In essence, it sounds like they are collecting the same commission whether they are the sole agent or an exclusive buyer’s is also involved. Knowing this, I’d be interested in approaching listing agents directly to negotiate deals in the future.

    Steven Boorstein
    Landlord Business Insider

  2. It does work perfectly well as long as no issues arise over price or repairs. If you approach an agent for a deal like this and at the same time want to beat the seller to death on the price, obviously it won’t fly.

    Many agents will refuse to do it fearing that they cannot be loyal to two parties at the same time; it is a fine line, but I’ve had no issues with it thus far. As long as your honest with both sides and give fair opinions, you do fine (as an agent). It saves both sides a lot of money and the agent makes the exact same for just a little more work.

    Most agent would read me the riot act for even writing this article! I argued with a few prior to submitting. In the end they admit they have done it, and it worked fine; it’s just not something we are supposed to encourage out of loyalty to fellow agents. As I said in the article, its not for everyone, or every deal, but it does work well when used at the right time. Good luck.

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