For first-time home buyers, closing costs are a major hurdle for home ownership. Coming up with a down payment and several thousand dollars for closing costs can be hard without home equity to tap.
To help, buyers often ask sellers to cover all or some of these costs. In markets favoring buyers, this is a common habit, but when the market switches to favoring sellers it becomes harder. Sellers who know they may get multiple offers are less likely to say “yes” to this request.
Yet even when the market favors sellers, buyers can still ask for this help. It all depends on how the offer is presented. Here’s how to potentially make it look appealing, even with other offers on the table.
Buyers Need To Consider The Total Amount
Many sellers build negotiation room into their asking prices. This means they anticipate some offers coming in that are lower than their asking price.
Buyers asking for closing costs can offer the full asking price or more than the asking price to make the offer more appealing.
For example, if the buyer needs $2,000 in closing costs, and offers $2,000 more than the asking price, the seller won’t stand to lose money and will find the offer more appealing. This, in effect, rolls the closing costs into the loan.
On the flip side, if a buyer makes an offer well below the asking price, then also asks for closing costs, the seller is likely to say no.
Buyers Should Consider Other Components Of Their Offer
Sometimes the problem the buyer faces is a lack of cash to cover the closing costs, particularly when using a no- or low-down payment loan option. To make the offer more appealing, buyers should look at the rest of the offer’s terms.
For example, a buyer may ask for closing costs but overlook other contingencies, such as non-urgent repairs. This makes the offer appealing, because the seller’s costs even out.
Buyers Can Offer To Close Quickly
Another way to make seller-paid closing costs something a seller will accept is moving the closing date up. Most sellers want to sell quickly, so the faster the buyer can close, the better the offer may look.
For buyers in a seller’s market who need closing cost help, the key is to make all other aspects of the offer appealing. By doing so, these buyers may just get the closing cost help they need to move forward with their home purchase.
One of the best things to do before entering into negotiation is to have your mortgage funding pre-approved. Contact your trusted home loan professional to get started today.
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About the Author:
Babak Moghaddam graduated from University of Southern California in 1985. He entered the mortgage industry as a compliance auditor at the Bank of New York in 1986 and completed his masters in Business Administration two years later. After seventeen years in the traditional mortgage banking world Babak finally transformed this vision into his own practice in 2002 when he formed Charter Pacific Lending Corp, a mortgage company that has provided over $900 Million in residential real estate loans throughout Southern California. Babak and his team do things a little differently than other mortgage providers. They work as financial advisors, because they have come to realize that a mortgage is a very powerful financial tool. And just like any other financial tool, it should be managed as part of the overall financial management plan to reach every home owner’s long and short-term financial goals much faster. You can contact Babak for a free consultation and strategy session at (800) 322-1217 X103.