Closing costs are typically 2 to 5 percent of the sale price of a house. If you struggled to come up with money for a down payment, having to find thousands of dollars more may seem impossible. With some types of mortgages, the buyer must pay the closing costs, or at least a percentage. In many cases, however, the lender doesn’t care who pays those fees. Sometimes a seller is willing to pay some or all of the closing costs.
Why Would a Seller Agree to Pay Closing Costs?
A seller and real estate agent set an asking price anticipating that a buyer will want to negotiate a lower sale price. If you offered to pay the full list price and asked the seller to cover the closing costs, the seller could still come out ahead financially in the end.
Sometimes sellers are in no rush to move, but in other cases they have a strict deadline; for example, if they need to start a new job. A seller may have already bought a new house and may be eager to sell the old one to avoid having to pay two mortgages at once. A homeowner who is motivated to sell quickly may be willing to negotiate to speed the process along. If you have been pre-approved for a mortgage and you offered to close quickly, the seller might agree to pay your closing costs.
An inspection is a routine part of a home sale. When an inspector notices a number of problems, a buyer often demands that the seller have them fixed before proceeding with a purchase. A seller may be willing to cover your closing costs if you don’t require a lot of repairs. Just don’t let problems that pose a safety hazard slide. Require the seller to fix those before you agree to buy the house.
Will the Seller Cover All Your Closing Costs?
Your mortgage lender may limit how much the seller gives you as a closing cost credit. The lender won’t allow the seller to give you a credit greater than the actual amount of the closing costs.
If the seller can’t or won’t pay all your closing costs, you might be able to work out a split or a reduction in the down payment or earnest money. Another option is to ask the seller to lower the sales price, which would in turn lower the closing costs.
Explore Your Options
Many people, especially first-time homebuyers, struggle to find money for closing costs and are unaware that having the seller cover some or all of those costs is even a possibility. Not all sellers are willing or able to pay closing costs, but many are. You won’t know unless you ask. Discuss the issue with your real estate agent.