Thursday, November 7, 2013

Question about paying for a Buyers Closing Costs


Question:   My neighbor said he just sold his home but he had to pay the buyers closing costs. No one ever paid for my closing costs. If I didn’t have the money, I didn’t buy it. Why is this allowed?

Answer:    First off, your neighbor did not have to pay for his buyers closing costs. He chose to as part of the negotiations. Your neighbor was satisfied with his bottom line, which is simply the net sales price of the home.  There is no difference whether he paid for his buyers closing costs or simply reduced the sales price by the same amount. The closing costs were taken out of your neighbors proceeds at closing. No money was given to the buyer upfront.  This transaction must be viewed as only a business deal. Keep your emotions out of it.

Times are different now.  Paying a buyer’s closing costs has advantages to the seller and buyer. For sellers, it presents an option in negotiations to help them sell their home.  For buyers, it allows them to either ‘buy down’ their mortgage interest rate or to have extra cash to update the home or make other improvements that may be needed.

A successful business transaction takes place when both parties are satisfied with the deal.  Apparently your neighbor was satisfied or he wouldn’t have accepted the offer.