Seller Paying Buyer Closing Costs? Why would they want to?

Many offers come in with the seller paying buyer closing costs. Aren’t buyer’s closing costs by definition for the buyer to pay?

Not necessarily! Many Tacoma sellers agree to pay the buyer’s closing costs.

Let’s say you’ve got your Tacoma home looking sharp, the “For Sale” sign adorns the front yard and suddenly an offer comes in—hallelujah! It looks okay, but what is this item seemingly hidden on the financing addendum? The buyer wants you to pay their closing costs?

Before you clutch your pearls, offended, let’s break it down a little and try to make a good business decision!

Paying Closing Costs Can Be Good Strategy

First, let’s clear up a common misconception: agreeing to pay a buyer’s closing costs isn’t an unusual concession and it may not even be a concession! It often just a matter of math. Offers often come in asking for concessions, whether that be in the form of a lower price, a long closing timeframe, or in the form of closing costs. You really need to look at the “net” offer; or the selling price minus the closing costs requested. Sometimes buyers even offer a higher purchase price in exchange for you covering their closing costs. For example, if your home is listed at $500,000, a buyer might offer $515,000 and ask you to credit $15,000 back at closing. You still net your original asking price (more or less) and the buyer brings less cash to the table.

Why Would a Seller Agree to Pay Closing Costs?

You open things up to more buyers. Covering closing costs can make your home accessible to buyers who have enough for a down payment but are a little light on extra cash for closing fees. When they ask for closing costs it is usually because they need closing costs. Try to view the request as them paying their own closing costs by wrapping them into the mortgage so they can pay over 30 years instead of all at once. They are, in effect, financing the fees.

You keep your bottom line. If the buyer’s offer is structured to cover the closing costs within a higher sale price, you’re not actually losing out. It’s just a different way to slice the pie.

A Pitfall of Paying Buyer Closing Costs

Appraisal drama

If the buyer’s lender orders an appraisal, which they nearly always do, and the home doesn’t appraise for the artificially inflated price, you might be back at the negotiating table or, worse, re-listing the home. Have your Realtor check out the comps ahead of agreeing to paying the buyers closing costs.

The Bottom Line

Saying “yes” to paying a buyer’s closing costs isn’t a sign of desperation. It’s a negotiation tool—one that can open your home to more buyers and help you get to “SOLD” faster, especially when the market is softer. Just be sure to work with your real estate agent – hopefully The Hume Group – to structure the deal so your net proceeds stay healthy and your stress levels stay low.

So next time you see a number under “Loan Cost Provisions” in the local real estate contract, don’t panic. It might just be the win-win that you that all parties really need. We invite a longer discussion of the pros and cons. You know where to find us!

Related: Costs of Selling a House in Tacoma