Seller Paid Closing Costs
If you’re contemplating your first investment – or maybe even your first purchase – you may be thinking to yourself OF COURSE I’ll have the seller pay my closing costs. That’s FREE MONEY! It’s a no-brainer, right?
Well, allow me to explain the process a little better and you can decide for yourself…
So, when you make an offer on the property, you specify ALL the details of the offer: what personal property is included, what outbuildings might stay, your right to have an inspection performed, how taxes will be handled, and what (if any) part of your closing costs you want the seller to pay.
So now you’re sitting down to make an offer, let’s look at an actual example of how this works:
Let’s say you find the place you like and it’s listed on the MLS for $100,000. You really like it and want to offer list price for it… $100,000. Then you get back to the page about how much you want the seller to pay towards your closing costs and you say $5000. You want $5000 towards your closing costs to be paid by the seller. Well, now your offer isn’t really $100,000, your NET offer is actually $95,000.
You’re basically saying “I’ll give you 100,000 for your house, but I want 5,000 back”.
$100,000 – $5,000 = $95,000.
If you want to truly offer $100,000, you must raise your offer amount to $105,000, THEN ask for $5,000 back.
$105,000 - $5,000 = $100,000.
It’s not rocket science, but if there are multiple offers on the same property, it could make the difference on which offer gets accepted. An offer without (or with lower) seller paid closing costs is always stronger than one with high seller paid closing costs at the same offer amount.
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