Can the Seller Pay Closing Costs in a Real Estate Deal? (2019) | Hauseit®

Can the Seller Pay Closing Costs in a Real Estate Deal? (2019) | Hauseit®


Can the Seller Pay Closing Costs in a Real
Estate Deal? Yes, the seller can pay closing costs on behalf
of the buyer in a real estate deal. Concessions by the seller are actually quite
common in a soft market. Why Would the Seller Agree to Cover the Buyer’s
Closing Costs? The seller might agree to cover some of the
buyer’s closing costs in order to incentivize the buyer to do a deal. In a slow market, otherwise known as a buyer’s
market, the seller won’t have a lot of options to choose from. Buyers will be scarce and will know that they
have negotiating leverage. How Might a Seller Advertise a Closing Cost
Concession? A seller ideally won’t advertise that they’ll
pay closing costs for the buyer at all, and will instead only offer such a concession
privately if a real buyer shows up who needs a little push to make or accept an offer. The advantage of offering such a concession
privately is that the seller won’t be bound to offer the same deal to everyone by default. However, a really desperate seller may not
care about option value and may just advertise in their listing description that they’re
willing to pay closing costs on behalf of the buyer. What Closing Costs Can the Seller Pay for
the Buyer? The seller can agree to pay virtually any
closing cost on behalf of the buyer, as the flow of funds will simply be adjusted at closing. With that said, it’s most common for the
seller to agree to pay for specific, and often major components of the buyer’s closing
costs. For example, the biggest closing costs that
a buyer might face in a typical resale transaction include the NYC Mansion Tax, the Mortgage
Recording Tax and title insurance premiums. What Are the Seller’s Own Closing Costs? The biggest closing costs that sellers typically
pay in a re-sale transaction include real estate broker commissions of up to 6% of the
sale price, NYC and NYS transfer taxes of up to 1.825% of the sale price as well as
flip taxes of 1-3% if they’re selling a co-op apartment. What Closing Costs Will Sponsors Agree to
Cover? It’s important to understand that buyers
are typically expected to cover the sponsor’s transfer taxes and attorney fees in a new
construction purchase. Even though this will get pitched to you as
being customary, it is in truth negotiable just like anything else in real estate. As a result, sponsors will often offer to
pay their own transfer taxes and attorney’s fees and pitch this as a concession to buyers
in a soft market. Ironic, considering that they would have had
to pay their own closing costs anyway if it was a normal re-sale transaction. The other closing cost that sponsor might
offer to pay on behalf of buyers is the NYC Mansion Tax. This is a predictable closing cost, and at
1% isn’t a huge burden on the sponsor. Keep in mind that sponsors prefer to negotiate
on closing costs vs headline listing prices because of the huge amount of inventory they
need to sell. The last thing they’ll want to do is to
lower their prices, which might affect their ability to sell their backlog of other units. As a result, a developer will almost always
be more interested in paying closing costs on behalf of a buyer, or paying them some
other form of a concession instead. Want to learn more? Check out www.hauseit.com and learn how you
can save $20,000 or more on your purchase through a Hauseit Buyer Closing Credit.

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