Understanding Closing Costs & Seller Credits

Understanding Closing Costs & Seller Credits

by. Jill Bartoletti

When it comes to buying a home, there are various expenses involved beyond the purchase price. One significant aspect to consider is closing costs. In this article, we will delve into what closing costs are, how they impact a home purchase, and explore the possibility of negotiating with the seller to have them cover these expenses.

What are Closing Costs?

Closing costs are the fees and expenses that are paid at the closing of a real estate transaction. These costs are separate from the down payment and typically include various charges associated with the mortgage loan, property transfer, and other services required to complete the home purchase.

Common Closing Costs:

1. Loan Origination Fees: Also commonly referred to as Underwriting, Processing, Admin or Commitment fees.  These fees cover the         administrative costs associated with processing the mortgage loan.

2. Appraisal Fees: An appraisal is required to determine the fair market value of the property.

3. Title Insurance: This insurance protects the buyer and lender against any potential issues with the property's title.

4. Recording Fees: These fees cover the cost of recording the new deed and mortgage with the appropriate government office.

5. Escrow Fees: Escrow services ensure that all funds and documents are properly handled during the closing process.

6. Credit reporting: Credit scores and debts must be determined for qualifying

Negotiating Seller Payment:

Buyers have the ability to negotiate with the seller to have them pay some or all of the closing costs. This negotiation can be done during the initial offer or as part of the counteroffer process. Here are a few tips to consider when negotiating seller payment:

1. Research the Market: Understand the current real estate market conditions and the typical practices regarding closing costs in your area. Work with you Agent to determine the viability of the request for Seller to pay costs, this is not always possible with high demand on a specific home.  Your Agent is your partner in this process, trust and value the advise they provide as they have a pulse on the market and each property.

2. Determine the Amount: Work with your lender to calculate the estimated closing costs and decide how much you would like the seller to contribute. It's important to strike a balance between your needs and the seller's willingness to negotiate.

3. Make a Strong Offer: Present a competitive offer that takes into account the closing costs you are requesting the seller to pay. This can make your offer more appealing and increase the chances of the seller agreeing to your terms.

Closing costs are always part of a home purchase regardless of the Lender you work with, and can add a significant amount to the overall expense. However, buyers have the opportunity to negotiate with the seller to have them cover all or part of these costs. By understanding the various closing costs involved, researching the market, and making a compelling offer, buyers can increase their chances of successfully negotiating seller payment for closing costs. Remember to always seek the advice of your Agent and Lending Team, we are all in this together and working toward the common goal of homeownership!