What are the Buyer's costs?
Buyers and Seller's of property both have what is termed " customary costs " incurred for the transaction. The buyer's customary costs are a 50/50 split of the escrow fee, (except for the portion required to be paid by the seller in an FHA or VA transaction ), prorated taxes, HOA dues if applicable, pre-paid interest and insurance premiums. Additionally, buyer's costs also include Loan fees, appraisal charges and title insurance costs for the lender. These costs combined are what make up the buyer's closing costs and can add up to 3.0% - 3.5% of the purchase price for an FHA, VA or USDA loan or other special program loan. ( Ex: up to $ 7500.00 on a $200,000.00 purchase ). Buyer closing costs are generally lower when using a Conventional Loan and lowest for a cash purchase.
Who Should Pay?
Buyer's closing costs are just that, the buyer's costs. In contrast, it has become almost a custom in our northwest area market for an offer to purchase to include a request for the seller to contribute funds to the buyer's costs to close. In some cases the seller will include an offer to pay some of the buyer's closing costs pre-calculated into the listing price. When making an offer to purchase that includes a request for buyer closing costs, keep in mind that the seller has closing costs as well ( see What are Seller's Closing Costs? on this Blog ) and work with your Realtor to structure an offer that can be accepted by the seller. At times the price of the property may need to be raised to accommodate the buyer's costs.
Are There Advantages to Paying My Own Closing Costs?
Yes, for many buyers, closing costs are a deduction on your tax return. If you have funds to close, it may be to your advantage to pay at least some or all of your own closing costs and negotiate a lower price for the property. Seller's are more willing or able to accept a lower selling price if the offer does not include a seller contribution to buyer closing costs.
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