How You Can Benefit from Paying Your Buyer's Closing Costs

Posted by Steph Kaye on Tuesday, March 29th, 2016 at 10:23am.

Emotions and preconceived notions can cause significant hang-ups during a real estate transaction and sellers often question why they should be responsible for a buyer's closing fees.  Many sellers reason that buyers who cannot afford to pay their own closing fees probably shouldn't be involved in the home buying process at all.  However, committing to the payment of closing costs on behalf of a buyer can result in a much faster sale of your home as well as more money in your account at the end of the transaction.  While paying a buyer's closing costs isn't an absolute must, it certainly is a powerful bargaining chip.  For example, consider that you receive two offers on your $400,000 home.  One offer is is contingent upon your agreement to pay $10,000 in closing costs and the other offer isn't asking for any help with closing costs.  Of course you would go with the highest net for you as the seller.  Therein lies the key: the name of the game is to get the highest net price possible.  

Real estate consists of very few absolutes and maximizing net income is what it is all about.  Counterintuitive as this may be, it is entirely possible that you can increase your net by agreeing to pay your buyer's closing costs as this increases the potential amount of prospective buyers who are interested in purchasing your home.  Many home shoppers are not able to come up with a down payment AND moving costs AND closing costs.  A seller's willingness to pick up the tab for closing costs can often increase a buyer pool by 25+% depending on the location of the listed property.  Remember: More buyers means more competition, leading to a quicker sale at a higher price.   

You have to consider your local housing market.  It is not ALWAYS beneficial to pay a buyer's closing costs.  If your area consists of climbing home prices, low inventory, and high competition, then it may be illogical to pay a buyer's closing costs.  However, paying closing costs in other geographical locations could be a must and there are many towns where such action could have a 50/50 chance of success.  

It is imparative to research recent comparable sales in your own neighborhood as you might find that EVERYONE is paying their buyers' closing fees upon selling their homes.  By refusing to consider joining the team of local home sellers, you might be forfeighting  thousand of dollars of your own money.  

An experienced, professional realtor understands that there will inevitably be local neighborhoods where buyers are most likely going to have FHA loans.  Those buyers often need help with closing costs.  The realtor's knowledge and experience will result in the budgeting of closing costs into the home when going through the purchase process.  The same professional realtor will tell a seller that if he or she refuses to help with closing costs in locations where buyers need help with such fees, they are actually eliminating all retail buyers, leaving them with a plethora of cash real estate investors to choose from.  You  might as well discount your home 10-20% as investors rarely pay more than 80-90% of a home's value.  It is more beneficial for sellers in the long run to offer to pay 3% in closing costs.  

For sellers who swim with big fish buyers who have limitless amounts of cash, be aware that such buyers are also looking for a deal because they know they are strong buyers.  They, too, may be hard to please when it comes to closing costs.  While cash is always king, there is always a strong premium on closing costs and $1 in closing is worth $2 in purchase.  

Consider giving a young, first-time home owner a break and feel good about putting more money into your own pocket all at the same time.  

 

If you'd like to learn more about the benefits of paying your buyer's closing costs, please don't hesitate to message Lang Premier Properties online or call us at 1-855-526-4466.

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