Sorry, Sellers, It Has Become a Common Condition
August 30, 2012
Homeowners who have not been home sellers in the past 5 or so years can be surprised when they receive an offer. Not because offers from buyers have been somewhat scarce, but because the buyers are asking the sellers to pay their closing costs. Lenders allow sellers to pay a buyer's closing costs up to an amount equal to 6% of the purchase price depending on the type of loan.
Why do buyers ask? Probably because they can. As we are all aware, the past several years have been tough ones for sellers and, to a degree, for buyers. Lenders have tightened their standards and buyers have been short of cash. If the only way a buyer can come up with the necessary funds to purchase a property is to have the seller pay some or all of their costs, a seller, however unwillingly, may rather do so than to lose a sale.
In reflecting on how commonplace the request for buyers' costs has become, I also trace some of the practice back to when lenders changed the rules about credits to buyers. Once upon a time, buyers asked for a carpet allowance (and sellers even offered allowances in the listing) or a roof allowance, etc. Lenders decided that buyers did not always use this additional money for the sated purpose and the improvement to the property was never completed. At that time real estate agents changed a carpet allowance into a request for closing costs. Then lenders set rules as to how much such credits could be and here we are.
Sellers can always counter out such requests or buyers can pay a little more and have the seller agree to credit.
In the end for both parties, the issue is the bottom line - how much cash the buyer will need and how much the seller will net out of the sale.
Homeowners who have not been home sellers in the past 5 or so years can be surprised when they receive an offer. Not because offers from buyers have been somewhat scarce, but because the buyers are asking the sellers to pay their closing costs. Lenders allow sellers to pay a buyer's closing costs up to an amount equal to 6% of the purchase price depending on the type of loan.
Why do buyers ask? Probably because they can. As we are all aware, the past several years have been tough ones for sellers and, to a degree, for buyers. Lenders have tightened their standards and buyers have been short of cash. If the only way a buyer can come up with the necessary funds to purchase a property is to have the seller pay some or all of their costs, a seller, however unwillingly, may rather do so than to lose a sale.
In reflecting on how commonplace the request for buyers' costs has become, I also trace some of the practice back to when lenders changed the rules about credits to buyers. Once upon a time, buyers asked for a carpet allowance (and sellers even offered allowances in the listing) or a roof allowance, etc. Lenders decided that buyers did not always use this additional money for the sated purpose and the improvement to the property was never completed. At that time real estate agents changed a carpet allowance into a request for closing costs. Then lenders set rules as to how much such credits could be and here we are.
Sellers can always counter out such requests or buyers can pay a little more and have the seller agree to credit.
In the end for both parties, the issue is the bottom line - how much cash the buyer will need and how much the seller will net out of the sale.
posted by shirley harry at 8:39 AM
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