We are selling a home, & purchasing a newly built home. Re: local custom are we to pay all closing costs?

Asked by Vienne, 95747 Tue Sep 1, 2009

We are trying to preserve some $ to add to our down payment on the new house. Our agent told us we will incur about $19K in closing costs on the sale of our home. We conservatively think the house will sell for $320K to $330K.

Then it sounds like we will be paying closing costs as we are buying from a builder. Please advise. Is there any flexibility?

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Jeff Marr, Mortgage Broker Or Lender, Roseville, CA
Wed Sep 30, 2009
Vienne - you state your agent is estimating $19k in closing costs on the home you're selling, I'm assuming this amount doesn't include the realtors commissions you're also paying? This estimated amount works out to be roughly 6% of your sales price, which happens to be the maximum amt a seller can contribute towards buyer's closing costs for an FHA loan............

And if you're also purchasing another home, and you're being asked to pay those closing costs, I wouldn't blame you if you felt like you're getting a double whammy!

However, closing costs, and the perception of who should pay for what, don't tell the whole story. If the prices you're paying and receiving on your respective homes seem fair, if not great deals to you, and if your buyers can actually close on the home your selling, then consider these strong compensating factors.

If after you've stepped back and looked at your picture, and the closing cost matter still doesn't seem fair, then make sure to let your agent(s) know your feelings!

good luck, and let me know if I can provide any further details relative to your situation!

best, Jeff Marr
Stanford Mortgage
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Jim Walker, Agent, Carmichael, CA
Wed Sep 2, 2009
Ask your listing agent to either represent you on the purchase from the builder or refer you to a another agent to represent you in dealings with builders. You will get the best advice from an agent who is required to put your fiduciary interests first.

There are customary splits according to tradition in counties. Custom is not law, it is just tradition, and not strictly adhered to because the contract is superior to custom.

Escrow companies will look to the contract first. If the closing costs are mentioned in the contract, they will follow the contract. If there is no mention of who pays the closing costs, the escrow company will prepare escrow instructions according to "custom".

Most contracts have a page that covers who pays for which closing costs. Sometimes the choices are counteroffered.

I have written hundreds of contracts. Who pays for the closing costs is always in my contracts.

When you deal with Fannie Mae or some REO seller, these entities often have non negotiable positions that may be in direct contradiction with local customs. A common situation is Fannie Mae does not want to pay any county transfer tax even if it is local custom for the seller to pay that tax or half of it.

Builders want to sell product. They will have a company or a subdivision guidesheet on how closing costs are to be allocated by the sales people. The sales manager or regional vice-president usually has the power to absorb some of the fees that they would usually ask the buyer to pay. They make these decisions case by case.

If you find inflexibility on closing costs, look to see if you can find some other point of flexibility such as appliances, landscape or trim upgrades, or closing cost "credits"

Credits are great fun. The way they work, is that the HUD-1 settlement statement will show you, the buyer, paying such and such in closing costs. But, due to magic accounting of a closing cost credit of X number of thousand dollars paid to you from the seller at the close of escrow, you don't really pay for all of it.
0 votes
Teri Andrews…, Agent, Auburn, CA
Tue Sep 1, 2009
Usually in Placer County title and escrow are split 50/50 between buyer and seller, but everything is open for discussion during the offer process. Ask your agent for a estimated sellers net sheet so you can see the numbers, what is she including that 19K, all expenses, repairs, commissions, seller contribution toward buyers closing?

You should also be able to get an est for your purchase also. It will be ballpark, but can give you some numbers to work with.

Teri Andrews-Murch
Lyon Real Estate
1900 Grass Valley Hwy
Suite 100 Auburn, Ca
Ca License #01734030
0 votes
William Pola…, Mortgage Broker Or Lender, Suwanee, GA
Tue Sep 1, 2009
Flexibility. Of course. There are several ways to do this. The first is to negotiate the closing costs to be paid by the builder (remember, they inflate the cost of the house in most cases, so they have a little wiggle room). If they are hurting and don't have room, you may be able to include the closing costs into the sales price. If you are buying a home for $400k for example and the closing costs will be $8000 (typically 2%), Set the price at 408K and have the builder pay your closing costs. Max contribution: 5% down: 3% in closing costs (CC). 10% down: 3% CC. 20% down: 6% CC. FHA is 6% regardless of down payment. Another option is to have the lender pay some of the costs for you. The higher the rate sold to you, the more yields spread the loan officer receives. He/She may be able to offer you a higher rate and in return, pay some or most of the costs for you. I don't know what state you are in, but regardless, if you have any questions, feel free to call me. Follow the link and look for me (william).
0 votes
Bill Eckler, Agent, Venice, FL
Tue Sep 1, 2009

Closing costs are normally shared between the buyer and seller. Our recommendation is to be in touch with your "closing agent" for a clarification of the expenses you will be required to cover at closing.

Good luck
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