Buying and selling a home are both expensive real estate processes, and the closure of these transactions are especially costly. Closing costs are typically 2-5% of the sale price. So who pays these off?
Homebuyers are responsible for the majority of closing fees. These fees can include those incurred by the lender, appraiser, inspector, title company, insurance company, and other companies involved for their services. Any service that is performed to get your mortgage approved will likely be your responsibility as a buyer.
Typically the seller is required to pay for agent fees for both themselves and the buyer. Depending on state regulations, this can add up to 6% of the selling price. However, during negotiation, a buyer can request a seller to make a contribution towards their closing costs. This is known as “seller concession” or “seller contribution” and is a matter of negotiation.
So how do you negotiate these fees?
Understand your offer.
In order to get the seller to agree to pay closing costs, you have to make an offer that they will think is reasonable. This often means paying the full listing price or close to it, avoiding contingencies that will be inconvenient for the seller, and offering a quick close. The easier you make it on them, the more likely they are to agree to pay closing costs.
Understand your local real estate market.
Although buyers have a lot of leverage in negotiating with sellers, they unfortunately cannot make any demand their hearts desire. Like sellers, buyers have to be aware of the current real estate market in their area in order to know their competition and make a reasonable offer.
In a seller’s market, where sellers receive many offers, one contingency could cause the seller to turn down an offer for another almost identical offer. However, in a buyer’s market where there are less people buying, buyers may be able to be a little more stubborn. In such instances, sellers commonly pay 3% toward buyer’s closing costs in a buyer’s market because the market is slower.
Overall, you need market research and an experienced agent to help you navigate your offer. Only an agent has the experience of working with these offers and knowing what has worked and what hasn’t in your area.
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