Sellers Choice - Help With Closing Costs

By: Justin Lee

Paying the closing costs is becoming more prevalent across the whole country, according to realty experts in Maryland. This may seem strange as the house price could just be dropped and it would appear that the sell/buy formula would still have the same balance.

However, this isn't quite the case; where the balance is changed is by using a lender. Almost all house purchases are not paid by cash they are paid by the cash borrowed from the mortgage lender. This means that if the house price is $200.000 and the buyer has to put 5% out as a down payment, the buyer will need to find $10,000 deposit.

The 95% loan on the $200,000 house will be $190,000. Knowing these figures, a couple or family will set about looking for their dream home at that price. Once they have found it and it is surveyed, there may be one or two things wrong with it. Perhaps the lender now says that as the property needs a new roof, they will withhold the $5,000 to replace the roof.

This will put the buyer in a predicament as most people pull out all the stops to get the house they want and there is no cash left over.

The seller looks like they are going to lose the sale for a mere $5,000.00. If the house price is dropped the buyer will simply get less from the lender, because they will get 95% of the revised (dropped) price, plus they will take off the same $5,000 for the roof. This would mean that the deal is no further ahead.

Another disadvantage with dropping the price is that all the paperwork has to be done again and this delays the transaction. Delay is never a good thing in a house sale, it can make either party nervous or the deal can just lose its momentum.

Here is where the seller can step up and say one of two things that will help. The seller could suggest he will pay for or get the roof done. The seller could also suggest that he will pay the closing costs so that the buyer can afford to add his extra money (saved for the closing costs) onto the lenders cache.

Either way, the seller has 'helped' the buyer to buy the house. This is a choice that is strictly the seller's call. It is obviously a financial loss to the seller, and a financial gain to the buyer.

Why would a seller 'give' some money to a prospective buyer? Well, if this kind of deal were to happen at all, it would only happen on the advice of the listing real estate agent. The agent will know if such an offer would 'clinch' the deal, and in fact would likely make sure that such a deal would only be offered if it did finalize the deal into a legally binding sale.

For the buyer, this means that in a buyer's market, in which it is obviously not so easy to sell a house, he has managed to retain the prospective buyer and keep the buyer's interest and money involved in the sale of his own property, thus encouraging the sale.

In the overall picture, $5,000 can probably be recouped by the seller more easily than trying to find a new buyer and waiting another two months. During the theoretical two month wait, house prices could drop further - a further $5,000.00 even! This is called cutting your losses.

It is not be an option that a seller will want to include when he lists his house, but it makes good business sense to proceed in your house selling with an open attitude that will allow for such a magnanimous gesture if needs be.

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