Why Should I Pay the Buyer to Buy My House?

Q.  My neighbor is selling his house and mentioned to me that he is paying the buyer's closing costs.  That doesn't make sense to me.  Can you tell me why he would do that?

 

A.  Usually, a buyer will ask the seller to pay their closing costs if they are entering the market and have limited cash available beyond the required down payment.   This buyer need or request is often accompanied with VA or FHA financing.  

 

With FHA financing, the buyer can purchase with less than a 5% down payment.  With VA financing, the buyer can purchase with a zero down payment.  As long as the buyer qualifies to make the payments on the home, the lender is fine with the seller paying the costs. 

 

Most sellers are only interested in their bottom line, meaning the amount that he or she will walk away with at the closing.  How the financing or terms are structured is of secondary importance.  A good Realtor will help explain this process to both seller and buyer and will also take steps to ensure that the transaction is in the best interest of the parties involved.

 

Buyers who cannot purchase unless the seller helps with their financing costs, should be prepared to pay full price or even more than the listed price so that their offer can compete with others who who may not be asking for this seller concession.

 

It can be discouraging for a buyer when the seller takes an "all cash" offer or an offer with conventional financing instead of theirs.  My advice to buyers with minimal cash down is this. Continue to save as much money as you can by eliminating some unnecessary expenses.   The more cash that you are able to contribute to the transaction, the more seriously your offer will be taken by the seller. 

 

NancyPuder is the broker and owner of Signature Properties, a real estate sales and management firm in Arroyo Grande, CA.  You may contact her at Nancy@NancyPuder.com or (805)710-2415 She always enjoys hearing from you!