Home Buying in 07044>Question Details

Olimits7, Renter in Nutley, NJ

Who normally pays for the closing costs, seller or buyer?

Asked by Olimits7, Nutley, NJ Wed Mar 27, 2013

Also, what closing costs are usually the responsibility of the seller? and what are the responsibility of the buyer?

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Both a buyer and seller have closing costs. Typically, a seller pays real estate commissions, transfer fees and attorney expenses for seller representation. Most commonly, a buyer in NJ pays inspection, appraisal, survey, title, loan origination (if any), luxury tax (if property sale amount exceeds 1M), HOA transfer fees (if any), attorney fees for buyer representation, and sometimes a buyer might have a fee due to their buyer agent/broker.

Buyers can ask a seller to pay a portion of their closing costs. Usually this is done to minimize the amount of cash a buyer needs to present at closing. If conserving cash is not a buyer's objective, the buyer will simply reduce the offering price on the property.

Example:

1) Offer seller 100K and seller to pay 6K toward buyer closing costs nets the seller 94K. If buyer puts 5% down, the buyer needs 5K in cash to complete their purchase. This oversimplified example assumes the closing costs are exactly 6K.

2) A buyer could simply offer 94K and pay their own 6K in closing costs. If the buyer puts 5% down, the buyer need 4.7K for the down payment PLUS 6K in closing costs. The buyer needs 10.7K in cash to complete their purchase. This oversimplified example assumes the buyer closing costs are exactly 6K and that the seller has paid exactly 6K toward closing costs.
2 votes Thank Flag Link Wed Mar 27, 2013
Deborah Madey, Real Estate Pro in Red Bank, NJ
MVP'08
Contact
If You are the seller and not using a realtor does the seller or buyer pay closing cost? and Where would I look up for what a land contact?
1 vote Thank Flag Link Sun Sep 8, 2013
I Live in LaPorte, Indiana not Verona,NJ....
Flag Sun Sep 8, 2013
Both do, the sellers has there closing costs and the buyer has there closing costs, unless the it is negotiated that the seller will pay the buyers closing costs and that is rare.
0 votes Thank Flag Link Sun Sep 28, 2014
Who normally pays for the closing costs, seller or buyer in nys?
0 votes Thank Flag Link Sun Aug 24, 2014
Each side will have their own closing costs. Sometimes one side will issue a credit the other.
0 votes Thank Flag Link Wed May 21, 2014
It is correct that the Buyer "NORMALLY" absorbs closing cost. However remember everything in life is negotiable, so ask your real estate professional for his/her opinion. That is what we are here for. TO SERVE YOU. And to give you the best advice. And by the way. Great question, this is one that many people want to ask but do not.
0 votes Thank Flag Link Wed May 21, 2014
You can get a reverse mortgage from a private lender or it can be federally-insured. The most well-known product is the Home Equity Conversion Mortgage (HECM) which is backed by the Federal Housing Administration (FHA). It’s generally less expensive than a reverse mortgage from the private sector, but you’ll still pay a host of fees like a mortgage insurance premium, home appraisal, title insurance, recording fees, and all the other standard loan closing costs for your area.

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0 votes Thank Flag Link Fri Oct 4, 2013
Typically, closing costs are paid by the buyer, since the costs are incurred by the buyer. There are a few items paid by the seller, like commissions, transfer fees, and their incurred attorney expenses.
0 votes Thank Flag Link Sun Sep 8, 2013
It differs from state to state, but Typically the buyers losing costs are paid for by the buyer though it's possible to have many of the paid by the Seller. However there is no free lunch. Sellers have bottom lines, and if you wan them to contribute $5000 (as an example) in closing cost assistance then the price of the house will end up being the sellers bottom line plus $5000.

If you are getting an FHA loan it may be that getting the seller to contribute to your closing costs may be a lender requirement. If you're getting a conventional loan with 20% down, there' no reason to ask for closing costs.

You should be having this discussion with your buyer broker (I hope you're using one) and your lender.
I've attached a link below on how to find a great buyer broker if you haven't already done so.
0 votes Thank Flag Link Fri Mar 29, 2013
When closing costs are rolled into the offer with the seller paying them, it raises the offer price by that amount. The proceeds to seller are the net of course. The increase to the purchase price to cover closing costs can strain the appraisal because as far as the bank is concerned the purchase price is the gross amount. It can be especially tough if the appraisal comes in short of the gross number, but adequate to cover the net.

Good luck and best,
Jeanne Feenick
Unwavering Commitment to Service, Unsurpassed Results
0 votes Thank Flag Link Fri Mar 29, 2013
To answer your original question, if sellers are not motivated to sell, then they will often turn down the most reasonable offers. Often FSBO's are just testing the market. They are not trying to save you money but save the commission and often buyers may over pay for a FSBO not realizing the actual comps. ( I am trying to sell a home right now for someone who was an out-of-state buyer who overpaid by $75,000 in cash on a weekend visit and never got an appraisal--just went by the assessment). When it comes time to appraise, that's when the problems start. If a seller's concession knocks out the appraisal then you will have to either reduce the concession down or ask the seller to reduce their price. This is where the art of negotiation is important. Also, the assessed value is only important if you know the retail ratio of assessed to market value in that town; however, it doesn't stop there. There is no rhyme or reason to sales price and assessed value in many recent sales this spring. They are all over the place. What is important is the recent sales of similar properties. If you need help in determining a suitable offer price, I'm willing to help knowing that that you are working with a FSBO. I can run a quick report for you. Sandra Bolcar 201-247-5768
0 votes Thank Flag Link Thu Mar 28, 2013
Thanks Sandra for your helpful suggestions. I feel informed!
Flag Wed Jul 31, 2013
Glad you've done your due dillgence, and have others working on your behalf.


I was surprised it appeared as though no one explained the "closing costs" situation to you, as your questions were basic, and it seemed as though you were confused.

Glad you were just "confirming" the information you already had.

Good luck with the house!
0 votes Thank Flag Link Thu Mar 28, 2013
I am very thorough when it comes to researching online; I have a lawyer and a mortgage guy which I've asked these questions to already.

But just like seeing a doctor it doesn't hurt to hear a 2nd, 3rd, etc. opinion from other people; this is why I also come to these forums just to be more informed than before.

I'm not just basing this on the tax assessment; there are other avenues I compared this house to. Also, we have a realtor that we work with and since he can't help us with this FSBO he has also done a market analysis on the house which the price is higher than what the seller's asking price is. And like you mentioned before, if my mortgage lender's appraisal doesn't come in at the amount we are purchasing the home for; then the contract will just void based on the mortgage contingency.

This is a big decision and this is why I make sure I do my due diligience in asking multiple sources their opinions and knowledge on the matter, and I take this and move forward with what I believe is the best decision for me.
0 votes Thank Flag Link Thu Mar 28, 2013
PS

Just out of curiosity - on what did you base your initial offer of $500,000??

You stated:

"The counteroffer is still less than what the house is assessed for, and I feel it is still a good deal."

Why?

Do you know what the most recent comparable sales are?

The assessment may have nothing to do with the true MARKET value of the house, so if that's what you're basing your offer on, and nothing more than that, you really do need more information and help.
0 votes Thank Flag Link Thu Mar 28, 2013
to answer your most recent question - yes, the sellers WILL take care of paying their own closings costs....and, yes, you, as the buyer, are responsible for YOUR closing costs.

The different "costs" have already been listed and described for you by Debra.

If you need assistance paying YOUR closing costs, then you may ask for the seller's help in doing so by making an offer which reflects that.

Apparently no one has explained this to you - that would have been just one of the benefits that working with an agent would have offered you!

Since you're in NJ (and the part of NJ where we use attorneys for our closings) I'd advise you to speak with a real estate attorney NOW before you commit to anything in writing.

Clearly you need someone to walk you through the home buying process, help oversee it, and prepare you for what is ahead. This is too big of a purchase, and you are clearly confused already...............this is only the very beginning - so, for your own sake, please seek help.

Best wishes...........
0 votes Thank Flag Link Thu Mar 28, 2013
Thank you for your reply!

Yes, I was hoping to agree to their counteroffer amount of $535K and see if they would deduct the seller's concession from this amount instead of having to increase the offer price again so they net out.

That being said, I can definitely see them rejecting this since in the big picture they would be going lower than their $535K counteroffer amount.

However, the "closing costs" can't all be buyer related. I've read online that there are some closing costs that relate to just buyers and other closing costs that relate to the sellers.

Shouldn't the seller be responsible for their closing costs and me as the buyer be responsible for just my closing costs?

Who's closing costs are usually higher, the buyer or seller?
0 votes Thank Flag Link Thu Mar 28, 2013
Thank you for your reply!

Yes, I was hoping to agree to their counteroffer amount of $535K and see if they would deduct the seller's concession from this amount instead of having to increase the offer price again so they net out.

That being said, I can definitely see them rejecting this since in the big picture they would be going lower than their $535K counteroffer amount.

However, the "closing costs" can't all be buyer related. I've read online that there are some closing costs that relate to just buyers and other closing costs that relate to the sellers.

Shouldn't the seller be responsible for their closing costs and me as the buyer be responsible for just my closing costs?

Who's closing costs are usually higher, the buyer or seller?

Thank you!
0 votes Thank Flag Link Wed Mar 27, 2013
The question I think you're asking is if the sellers might consider paying your closing costs, but I am not sure if you're asking them to pay it out of the $535,000 higher offer you're considering making.............or.............if you're going to ask them to pay the closing costs over and above the 535,000 counter offer they have given you...so that they still net that 535,000.

So..........to answer the question you asked below - in my opinion - you have nothing to lose to come back and ask for the closing costs to be taken out of your new 535,000 offer..........try it......see what they say...... but realize that if they are really firm with that number, they will want to net it, and not have the closing costs subtracted from it, so they may reject that offer.

You will then have to decide if you want to offer more than 535,00, and ask for closing costs which will then net the sellers their desired number.

Also realize that assessed values do not always reflect the market value!

Have you had anyone verify what the comparable closed sales have been?
Really make sure you know the value is there before inceasing your offer!

Of course, as a safety net, you will have an appraisal that will have to equal your purchase price, so this will ultimately verify your offer is within a fair market value range.

Good luck - let us know if you get the house!!
0 votes Thank Flag Link Wed Mar 27, 2013
This is my current issue; looking into a FSBO home. I made an initial offer at $500K, and then seller came back saying there non-negotiable final counteroffer is $535K.

The counteroffer is still less than what the house is assessed for, and I feel it is still a good deal. But if we are going to come up $35K and agree to their offer and we can't negotiate anymore I want to see if they would be willing to do a "seller's concession" to pay for all the closing costs.

They don't seem like they are in a rush to sell; since the house has been listed for a while on a FSBO site; so I think they just want to get there offer price. We are great buyers; first time buyers and putting 20% down, but if we are going to come up $35K I want this to be a fair price still for me. At the same time, I don't want to lose the house if they decline the "seller's concession".

Would it be worth asking for a "seller's concession" to cover the closing costs?
0 votes Thank Flag Link Wed Mar 27, 2013
If you are the seller, your actual closing costs are considered lower than the buyers; however, there are many other things to be aware if.

First off, there is the commission to the listing and selling agencies on the sale of your home usually around 5-6% if you are using an agent. However, behind every successful closing there is usually a successful agent holding everything together.
Then on the HUD-1 Closing Statement there is the NJ Realty Transfer Tax which is roughly about 1 percent of your sales price. For sales prices over $1,000,000, the buyer also pays an equal transfer tax sometimes referred to as the McMansion Tax.
The pro-rated real taxes could mean that you owe tax compensation to the buyer at closing depending on what you close in.
The cost of the Continued Certificate of Occupancy (in some towns) and Smoke Detector/Carbon Certification (in all towns) can run anywhere from $50 to $200.
The cost of releasing your mortgage and proof that it is paid up up to $150
The cost of your attorney on the seller's side should be a little less than the buyer's about $900-$1,000 on the average.
If you are giving a seller's concession to help with the buyer's closing cost, that could also be around 3% of the buyer's mortgage (sometimes 6%) but you should really look at the gross sales price as the amount you will pay the NJ Realty Transfer tax on. The net figure is what you are actually receiving for your home.
If you are short selling your home, the city certs are the cost of the buyer and the commission may be picked up by the shorted bank depending on your financial situation.
There are other costs depending on the situation but these are the basic ones for the seller.
The buyer has to pay the title search and insurance fees, ($2,500-$3,500 on average) homeowner's insurance, mortgage company fees, home inspection fees and attorney fees usually around $1,000-$1200.
If you need any other info regarding closing costs, a realtor or attorney will be able to help you. Call me if you need any further help. 201-247-5768. I'll be happy to help as I handle the Essex county area.
Sandra Bolcar
Broker Associate
RE/MAX VILLAGE SQUARE
516 Valley Rd
Upper Montclair, NJ
http://www.WhyListWithSandra.com
0 votes Thank Flag Link Wed Mar 27, 2013
Well typically closing costs are the buyer's responsibility. Though the seller has their own closing expenses they're responsible for, buyers are also responsible for their own closing costs, which happen to be about 95% of all closing costs involved in a real estate transaction.

Buyers can request the seller to gift them up to 6% of the seller's proceeds , from the purchase price, to be used towards the buyer's closing costs. This is called seller concession.

If my response was helpful, consider clicking BEST ANSWER!

Javier Meneses
Senior Loan Officer
NMLS #23130
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
jmeneses@snb.com
(516) 606-9648
0 votes Thank Flag Link Wed Mar 27, 2013
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